GAIL joining hands with RCF for gas project

New Delhi: State-owned gas transmission and marketing major, GAIL (India) Ltd, which reported a 28 per cent increase in net profit for the second quarter of the current fiscal, has decided to explore sectors beyond its core business.

Terming it as vertical integration of business, the Chairman and Managing Director, Mr U.D. Choubey, on Wednesday while announcing second quarter numbers said, “GAIL will soon be joining hands with Rashtriya Chemicals and Fertilizers Ltd (RCF) for integrated ammonia-urea plant based on synthesis gas.”

The company is looking at jointly exploring with RCF the potential of proposed surface coal gasification project in Talcher. “The board of directors of GAIL approved the signing of a memorandum of understanding (MoU) with RCF,” he said.

Under the MoU, GAIL will carry out techno-economic study of a commercial coal gasification plant, whereas RCF will carry out the techno-economic study of a commercial plant for utilising synthesis gas from the proposed coal gasification plant. GAIL and RCF will jointly evaluate the coal gasification potential for the fertiliser industry.

According to Mr Choubey, the project will help produce 7.76 mmscmd of synthesis gas (equivalent to 3,000 tonnes per day of ammonia). The estimated cost of proposed coal gasification project is Rs 2,400 crore. GAIL will focus on the production and marketing of synthesis gas which will be in line with its core function of gas handling. As regards the equity structure of the project he said it is yet to be worked out.

GAIL has registered a turnover of Rs 4,529 crore in the second quarter of 2007-08, a 22 per cent increase over the turnover in the corresponding period last year.

The net profit for the second quarter increased by 28 per cent to Rs 573 crore (Rs 448 crore). The gross margin increased by 40 per cent to Rs 1,059 crore in the second quarter of the current financial year.

“These improved results have been despite the increase in effective rate of tax from 27.6 per cent to 32.2 per cent during the first half of the current financial year because of expiry of tax holiday benefits in case of the Pata project, and additional capitalisation of Rs 1,586 crore made during the current year with a consequent increase in depreciation by Rs 6 crore,” the GAIL Director Finance, Mr R.K. Goel, said.

Besides, the adverse effect of rupee appreciation on profitability to the extent of Rs 131 crore, the subsidy sharing of Rs 260 crore to partially offset under recoveries suffered by the oil marketing companies has also affected the company’s performance, he said.

The increase in revenue is mainly due to better realisation in petrochemicals, LPG and other liquid hydrocarbons.

For the first half of the current financial year GAIL has registered a turnover of Rs 8,775 crore, a 13 per cent increase over the turnover in the corresponding period during the last financial year. The net profit for the first half was up by 21 per cent to Rs 1,258 crore (Rs 1,040 crore).

City gas projects

GAIL also announced forming a joint venture for city gas projects in Vadodara.

The board approved the formation of a joint venture with Vadodara Mahanagar Seva Sadan (VMSS). GAIL will have a 25 per cent equity in the proposed venture, while VMSS will have 26 per cent equity.

The balance 50 per cent equity will be held by strategic investors and public. GAIL’s contribution to the joint venture will be by way of management and technical skills, signing Gas Sale/Purchase Agreement and expanding CNG outlets network.