GAIL Limited's Gas Pipeline to Service 225-Megawatt, Gas-Fired Plant in Uttarakhand

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Researched by Industrial Info Resources (Sugar Land, Texas)--GAIL (India) Limited (BSE:532155) (New Delhi), India's state-operated natural gas company, has approved a plan to extend its pipeline network to provide gas supplies to the north Indian state of Uttarakhand. Following this decision, the state government has cleared a proposal submitted by Sharawati Energy Private Limited (Gurgaon, Haryana) to build a 225-megawatt (MW), gas-fired plant at Kashipur, in the Kumaon region of the state. The project will receive its gas feed from GAIL's pipeline network, from the neighboring state of Uttar Pradesh.

The decision follows an announcement made by the Uttarakhand government to build one gas-powered power plant each in the Kumaon and Garhwal regions of the state, with assistance from GAIL. The electricity generated at these facilities will be consumed primarily by industrial establishments in the area. The state authorities also had urged the union government to allocate 3 million standard cubic feet per day of gas for these projects. Subsequently, GAIL agreed to provide gas feed for these projects.

GAIL will provide gas to Garhwal from Saharanpur in Uttar Pradesh through its Dadri-Bhatinda line. The pipeline will be extended to Haridwar. The company's pipeline project connecting Moradabad and Karanpur in Uttar Pradesh will connect the industrial towns of Kashipur and Rudrapur in Uttarakhand. The gas pipelines are expected to boost industrial and economic activity in the state. Industrial development has spurred power demand to 26 million to 27 million kilowatt-hours. The state is facing acute power outages, which is adversely impacting production activity. Several leading Indian companies, including Tata Motors Limited (BSE:500570) (Mumbai), Hindustan Unilever Limited (BSE:500696) (Mumbai) and Bajaj Auto Limited (BSE:532977) (Pune, Maharashtra), have facilities in Uttarakhand. Economic and industrial activity is also likely to increase electricity demand 10% to 15% annually. The state government is also focusing on schemes, including land allocation, to attract investors to set up industrial units.

However, the Uttarakhand government has been facing allegations relating to this project. Opposition parties claim that the government will lose 13% power as royalty, as it has awarded industry status to the Sharawati project. The government also has allegedly provided several incentives, including stamp duty exemption to the company. The company was sanctioned 18.29 hectares of farmland, while the federal government had approved only 12 hectares.

The state government has been embroiled in controversies relating to energy projects. Earlier, the government faced flak about allocation of 56 hydroelectric power projects. Opposition parties ordered a Central Bureau of Investigation (CBI) probe, claiming that the government granted approvals for these projects under the "self-identified" route. The government had approved the hydro projects under three categories: small, mini and micro. Several project applicants are newly created organizations and liquor companies. Opposition leader Harak Singh Rawat also obtained documents, which indicated that the newly created companies have bagged projects with a total capacity of 377 MW. Credentials of company promoters were not ascertained. Details related to eight companies revealed that seven were owned by three people. In 2008, the government received 736 bids from private power producers, of which only 621 fulfilled the selection parameters.

In 2008, the government's attempts to develop new hydroelectric projects were thwarted. Environmental and religious issues deferred construction of the 381-MW Bhairongail and the 480-MW Pala Maneri hydropower projects. The federal government also put on hold the 600-MW Loharinagpala hydropower project that is being developed by NTPC Limited (BSE:532555) (New Delhi).

Uttarakhand, which was formed out of the Himalayan region in 2000, shares its borders with Nepal, Haryana, Uttar Pradesh and Himachal Pradesh. About 93% of its terrain is mountainous, making it highly conducive for the development of hydropower plants.

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