Press Releases

[New Delhi, July 15, 2005]

No adverse impact on GAIL’s profitability on account of subsidy sharing burden

As against the subsidy share of Rs. 221 crore during the first quarter of the Financial Year 2004-05, GAIL’s subsidy share during the same period this year (first quarter of Financial Year 2005-06) will be to the tune of Rs. 153 crore only. This is as per the recent directive of Government of India to share the total under-recoveries of Rs. 6514 crore (for the first quarter of Financial Year 2005-06) on the sensitive petroleum products of Oil Marketing Companies (OMCs).

Moreover, it is expected that GAIL will not be required to share the under-recoveries from the second quarter of Financial Year 2005-06 under the revised natural gas pricing mechanism, since effective from July 1, 2005, GAIL will be paying market driven price for its raw material, i.e., natural gas for manufacturing LPG.

It is understood that while computing the subsidy, the revised LPG prices payable to the producers of LPG (including GAIL) have been considered, although the prices actually paid were frozen by Oil Marketing Companies since March, 2005. Therefore, an amount of Rs. 43 crore is outstanding on this account from Oil Marketing Companies which is expected to be paid to GAIL shortly.

The subsidy burden on GAIL is likely to be offset by additional revenues expected from the increase in Petrochemical production, elimination of LPG and Kerosene subsidy from second quarter of the current fiscal, marketing margin on supply of RLNG and increased prices of LPG and other liquid hydrocarbons.

It is therefore expected that due to the above measures, there would not be any adverse impact on the profitability of GAIL in the current financial year.