Lok Sabha Question No. 3474 (UNSTARRED), answered on 2016-08-08
Subject: Net Profit of GAIL
Ministry: PETROLEUM AND NATURAL GAS
Asked by: T.G. VENKATESH BABU, M. UDHAYAKUMAR

## LOK SABHA

## UNSTARRED QUESTION NO. 3474 TO BE ANSWERED ON 8.8.2016

NET PROFIT OF GAIL

## 3474.     SHRI VENKATESH BABU T.G.: ADV. M. UDHAYAKUMAR:

Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

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- (a) whether the turnover and net profit of Gas Authority of India Limited (GAIL)  has been drastically reduced over the years and if so, the details thereof and the reasons therefor along with  the  steps  taken/being  taken  by  the  Government  to  increase  the  profits  in  the  coming years; and
- (b)  whether  the  decline  in  oil  prices  has  downgraded  the  rating  of  ONGC  and  Oil  India Limited despite strong liquidity/cash positions and if so, the details thereof along with the steps taken in this regard?

## ANSWER

## पेट्रोलियम औरप्राक ृ लिकगैस मंत्राियमेंराज् य मंत्ररी(स् विंत्र प्राार ( श्ररी धमेन्द रप्रधा

## MINISTER  OF  STATE  (INDEPENDENT  CHARGE)  IN  THE  MINISTRY  OF PETROLEUM & NATURAL GAS (SHRI DHARMENDRA PRADHAN)

- (a): The details of Turnover and Profit after Tax of GAIL during the last three years are as under:

(Rs. in Cr.)

| Financial Year   | Turnover/Sales (Net of Excise duty)   | Profit After Tax   |
|------------------|---------------------------------------|--------------------|
| 2013-14          | 57,245                                | 4,375              |
| 2014-15          | 56,569                                | 3,039              |
| 2015-16          | 51,614                                | 2,299              |

The reasons for fall in turnover and profit and the steps taken to improve performance are at Annexure-I and Annexure-II.

- (b):  For  Oil  India  Limited,  the  International  Credit  Ratings  have  not  been  downgraded. During their last review in February,-March, 2016, the International Credit Rating  Agencies Moody's & Fitch have maintained the Credit Ratings of the Company at 'Baa2' & 'BBB-' respectively.

For ONGC, Moody's have maintained the ratings as 'Baa1' with stable outlook for domestic currency and 'Baa2' with stable outlook for foreign currency.  S&P in view of the low crude oil  price  assumptions  has  revised  stand  alone  credit  profile  of  ONGC  from  'a'  to  'a-'. However, S&P has affirmed ONGC's long term corporate credit rating at 'BBB-' with stable outlook.

*****

## ANNEXURE-I REFERRED IN REPLY TO PART (a) OF LOK SABHA UNSTARRED QUESTION NO. 3474 TO BE ANSWERED ON 8.8.2016 REGARDING NET PROFIT OF GAIL

## Reasons for fall in Turnover & Profit

Turnover & Profit after Tax of GAIL has come down due to following reasons:

1. Decrease  in  availability  of  Domestic  Gas  and  usage  of  imported  LNG  which  is expensive compared to domestic gas for Petrochemical production.
2. With fall in crude prices during FY14-15, there was a significant fall in average Price realization from sale of Liquid Hydrocarbons (including LPG).
3. Non-utilization of full capacity of newly set up pipelines.
4. Fall in Domestic gas coupled with Consumer resistance to buy high priced Long term LNG, particularly by Power & Industrial sectors.
5. Fall in profit due  to reduction in Natural Gas  pipeline network  tariffs with retrospective effect starting from 20.11.2008.
6. Decrease in Production by 106 TMT in FY15-16 as compared with FY14-15 due to Preventive Maintenance shutdown, Integration of GPU I & II, lower gas availability due to ONGC shutdown etc.
7. Steep increase in Entry Tax by the Government of Madhya Pradesh on Natural Gas from  1%  to  10%  w.e.f.  01.04.2015,  there  has  been  a  negative  impact  of  on  the profitability of GAIL in FY 2015-16.

## ANNEXURE-II REFERRED IN REPLY TO PART (a) OF LOK SABHA UNSTARRED QUESTION NO. 3474 TO BE ANSWERED ON 8.8.2016 REGARDING NET PROFIT OF GAIL

## Steps taken by GAIL to improve the Performance

- 1) Government  has  approved  the  scheme  for  supply  of  Gas  under  Power  Pooling  to Stranded  Gas  based  Power  Plants  and  Pooling  of  Gas  in  Fertilizer  (Urea)  Sector. Accordingly, GAIL has increased sale of Gas by 7-8 MMSCMD thereby generating additional Revenue and Margin for the company.
- 2) In order to reduce the losses in the Petrochemical Segment, GAIL has taken initiatives for  procuring  cheaper  gas  from  Petronet  LNG  Limited  (PLL)/RasGas  for  Internal Consumption purpose. GAIL is also continuously exploring the opportunity to source cheapest gas for Petrochemical Segment.
- 3) Long Term Gas contract with PLL/RasGas has been successfully renegotiated w.e.f. Jan'16.
- 4) GAIL  has  taken  up  various  initiatives  for  improving  the  overall  efficiency/cost optimization/cost reduction for improvement in Profitability of the company.
- 5) With the persuasion of the Central Government, the Government of Madhya Pradesh has  restored  the  Entry  Tax  at  original  level  of  1%  on  Natural  Gas  consumed  for production of C2/C3 mix.