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GAIL may buy 26% stake in the Indian Gas Exchange

State-owned Indian Oil Corp (i.e. IOC) and also Bharat Petroleum Corp Ltd (i.e. BPCL) may buy around 26 percent stake each in gas utility GAIL India Ltd, that paying the govt over around Rs 20,000 crore each to become integrated energy firms as well.

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Following the Finance Minister Arun Jaitley’s February 2017 Budget announcement of creating the integrated oil majors, as IOC and BPCL had submitted separate proposals to buy the govt’s about 54.89 percent stake in India’s biggest gas marketing and also transportation firm, GAIL.

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One of the top source told since the govt is not looking at the actual merger of the oil companies but only transfer of its ownership to a cash-rich PSU, as the best option will be to split the around 54.89 percent holding in GAIL equally between IOC and BPCL. But HPCL hasn’t been merged with ONGC and continues to remain a separately listed company with the same board. After the buyout, HPCL has become a subsidiary of ONGC, which gets up to two seats on the company board.

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The source told IOC and BPCL too can follow the same model and split the government’s stake equally among themselves. GAIL will become its subsidiary and will continue to operate as a listed company with an independent board. IOC and BPCL would get to appoint one director each on the GAIL board. The source said the government has so far not taken any view on the proposals made by IOC and BPCL.

The government took up ONGC’s proposal first and the transaction was completed on January-end this year.IOC, the largest oil refiner and fuel marketing company in the country, wanted to either acquire the another refiner to add to its capacity or a gas company as like GAIL. as BPCL, on the other side, too has natural gas ambitions and also wrote to the oil ministry that saying GAIL was its number one choice for acquisition as well. The government holds a 66.13 percent stake in OIL, which at the current market price is worth about Rs 18,000 crore.

Incorporated in August 1984 by spinning off the gas business of ONGC, as GAIL (India) Ltd owns and operates about 11,000-km of the natural gas pipelines in the country as well. It sells around 60 percent of natural gas in the country. The source said the government has not taken any decision on the proposals sent by other PSUs.