GAIL seeks to set up gas stations across India

GAIL India Ltd, the state-run gas distributor, sees a big opportunity in the impending deregulation of diesel prices. As the subsidy on diesel prices reduces, GAIL feels this may lead many car owners to switch to liquefied natural gas (LNG), which is also less polluting.

''So far, diesel vehicles are preferred by the consumers because of the availability and economy of the fuel. But if the government deregulates it, the cost of CNG fuels would be much cheaper than diesel. This will create a good opportunity for the (gas) industry to exploit this segment,'' B C Tripathi, chairman and managing director of GAIL India, said at a function in New Delhi.

Last week, India's petroleum minister M Veerappa Moily said diesel prices would be deregulated in degrees, with the process to be completed by May 2014 (just before the next general election).

A green corridor is being planned from Jalandhar to Bangalore where CNG retailers such as GAIL Gas will set up fuelling stations while the automobile makers will invest in manufacturing gas run two-wheelers.

Tripathi however admitted that GAIL's ambitions of setting up gas refuelling stations along highways would be restricted by the lack of infrastructure. He said the project's viability would depend on factors such as availability of natural gas, its price, pipeline infrastructure and the number of CNG-run vehicles.

"Viability of the project would also depend on the difference between CNG and diesel rates. We expect that diesel prices will be deregulated so that the CNG would be a cheaper option despite the gas price hike from next financial year," he said.

Gas is a cleaner and greener fuel than petrol or diesel - but unlike other countries, the Indian government has made no move to reduce taxes and duties on gas-powered cars.

Tripathi said the ''green highway'' will allow road transportation to operate on natural gas by expanding the reach of CNG beyond cities. This corridor will benefit eight states – Karnataka, Maharashtra, Madhya Pradesh, Uttar Pradesh, Rajasthan, Delhi, Haryana and Punjab.

Lee Giok Seng, executive director, Asia Pacific of the Natural Gas Vehicles Association, said at the function, ''In Europe, there are powerful commercial vehicles which ply on long routes. The technology can be brought to India as well since the economic viability of diesel run vehicles would not be the same in the future.''

However, much would depend on the government's willingness to promote CNG-run commercial vehicles as it would require a new policy for the sector to be governed, he added.

 In June, the union cabinet approved a new formula to determine domestic gas price, which will double the gas price to about $8.4 per unit for private users.