GAIL India Calls for Fresh Bids for $1.1 Billion Pipeline Project as Steel Prices Fall

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Researched by Industrial Info Resources (Sugar Land, Texas)--Following a steep plunge in steel prices in light of the prevalent economic crisis worldwide, GAIL India Limited (BSE:532155) (New Delhi) has decided to call for tenders again to supply 100,000 tons of pipes for the Vijaipur-Dadri-Bawana pipeline project. A tender was first floated on August 14 this year, at which time it was valued at $202 million when the prices of commercial grade steel were at about $847 per ton. However, steel prices have since plunged to about $706 per ton as of early November. It is estimated that GAIL could save about $40 million to $50 million by calling for fresh bids.

It is also reported that GAIL decided to reissue the tender based on complaints pertaining to allegations of grafting in the first tendering process. As a signatory of the "Integrity Pact" with Transparency International India (TII), the Indian chapter of a global nonprofit organization that combats corruption, GAIL is mandated to maintain transparency in all public procurement deals. The original tender also had a pass-through clause to shield the bidder from an increase in steel prices, allowing the firm to pass on the increased cost to the customer. However, it did not have a discount clause as per which the bidder would be required to pass on the benefit of a fall in steel prices to the customer.

Bids for the original tender were accepted until September 18 with a validity of three months. GAIL received bids from four domestic firms, including Jindal Saw Limited (BSE:500378) (New Delhi), Man Industries (India) Limited (BSE:513269) (Mumbai), Welspun-Gujarat Stahl Rohren Limited (BSE:532144) (Bharuch, Gujarat), and PSL Limited (BSE:526801) (Kachigam, Daman), as well as from four foreign firms: Europipe GmBH (Mulheim, Germany), ZAO Izhora Pipe Mill (St. Petersburg, Russia), Marubeni Corporation (OTC:MARUY) (Chuo, Osaka) and Panyu Chu Kong Steel Pipe Company Limited (Guangdong, China).

The $1.1 billion project involves the development of pipelines to transport regasified liquefied natural gas (LNG) from GAIL's dispatch terminal in Vijaipur, Madhya Pradesh, to the firm's receipt terminal in Dadri, Uttar Pradesh, and further to Bawana, Haryana. The contract also includes the enhancement of compressors in Vijaipur and Jhabua in Madhya Pradesh as part of the first phase of the project. GAIL had appointed Engineers India Limited (BSE:532178) (New Delhi) as the consultant for the bidding process and to implement the project. GAIL is looking to procure pipes with diameters of 1,219 millimeters (mm) (48 inches), 914 mm (36 inches) and 508 mm (20 inches) with approximate lengths of 500 kilometers (km), 40 km and 54 km, respectively. Upon completion of the project, the pipeline will have a transmission capacity of 78 million standard cubic meters per day of regasified LNG.

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