GAIL plans US$4bln chemical projects to offset slowing growth due to price control

19-Oct-07
GAIL (India) Ltd., that earns half of its revenue from gas, is planning projects worth US$4 bln to expand in chemicals and offset slowing profit growth because of government controls on gas prices. Two 1 mln tpa ethylene plants will be built in southern India and overseas, for which the company is seeking partners. Talks are on with Reliance Industries Ltd. and state-run Indian Oil Corp. and Hindustan Petroleum Corp. to invest in the venture. The overseas plant may be located in the Middle East, Russia or Egypt. In September, India fixed the price of gas produced by Reliance Industries Ltd. at US$4.20 per mln British thermal units, about half the benchmark for LNG in Japan. The price cap limits GAIL's charges for transporting the fuel to factories and power stations. Returns on a major chunk of the company's business are fixed because of regulations, hence a quest by the company to boost revenue by getting into businesses that are free from regulations.
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