GAIL (INDIA) LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
Dear Shareholders,
On behalf of the Board of Directors of your Company, I am delighted to
present the 26th Annual Report of your 'Navratna' Company along with
Audited Financial Statements for the Financial Year 2009-10.
NATURAL GAS - SUSTAINABLE ENERGY:
Indian economy is poised for high growth as compared to other economies in
the world thereby generating energy demand. As the most environment-
friendly fossil fuel, natural gas is a major contributor to the clean and
green environment. The establishment of a sustainable energy road map is
one of the most pressing needs facing the country. Your Company for the
last 25 years is driving India's gas sector and is all set to take up the
challenge of providing this sustainable energy.
Today, your Company is an integrated energy company along the Natural Gas
value chain with global footprints. Having started as a gas transmission
Company during the late eighties, it grew organically over the years by
building a large network of natural gas trunk Pipelines covering a length
of around 7.8S0 km. Your Company has interests in the business of natural
gas, LPG. Liquid Hydrocarbons and Petrochemicals, the latter being value-
added products. Your Company has also diversified into Exploration &
Production, City Gas Distribution and is steadily developing its overseas
presence. Your Company is spearheading the move to a new era of clean fuel
industrialization.
Your Company is implementing projects for laying five new pipelines and
augmentation of two existing pipelines with a total length of about 7,500
km having an outlay of about Rs. 30,000 crores. This will lead to doubling
of pipeline length and transmission capacity in the coming years.
Your Company's present business portfolio includes:
* 7.8S0 km of Natural Gas high pressure trunk pipeline with a capacity of
approx. I SO MMSCMD of natural gas across the country.
* 7 LPG Gas Processing Units to produce 1.4 MMTPA of LPG and Other Liquid
Hydrocarbons.
* North India's only gas based integrated Petrochemical complex at Pata,
Uttar Pradesh, with a capacity of producing 4,10,000 TPA of Polymers.
* 1.900 km of LPG Transmission pipeline network with a capacity to
transport 38 MMTPA of LPG.
* 27 Oil and Gas Exploration blocks and 1 Coal Bed Methane Block.
* 13,000 km of OFC network offering highly dependable bandwidth for telecom
service providers.
PERFORMANCE OVERVIEW:
Your Company has recorded sustained growth in all key physical and
financial parameters in the Financial Year 2009-10. During the year 2009-
10, the important financial and physical highlights are as under:
Financial:
(Rs. in crores)
Particulars 2009-10 2008-09
Turnover (Net of ED) 24,996 23,898
Other income 541 797
Cost of Sales (excluding interest and 20,327 19,844
Depreciation and including extraordinary
items)
Gross Margin 5,210 4,851
Interest 70 87
Depreciation 562 560
Profit Before Tax 4,578 4,204
Provision for Tax 1,438 1,400
Profit after Tax 3,140 2,804
Appropriations:
Interim Dividend 254 507
Proposed Final Dividend 698 381
Corporate Dividend Tax 159 151
Net Transfer to Bond Redemption Reserve (3) 32
Transfer to General Reserve 314 280
Balance carried forward to Balance Sheet 1,718 1,453
Physical:
Particulars 2009-10 2008-09
Gas Transmission (MMSCMD) 106.74 83.29
LPG Production (TMTs) 1,100 1,088
Pentane/Propane/SBP Solvents/Naptha Production 340 313
(TMTs)
Polymer Production (TMTs) 417 420
LPG Transmission (TMTs) 3,164 2,744
Converged Accounting Standards (IFRS) Implementation:
In accordance with the road map given by the Ministry of Corporate Affairs,
Government of India, Accounts are to be prepared on the basis of converged
Accounting Standards i.e. Indian Accounting Standards converged with
International Financial Reporting Standards (IFRS) w.e.f. 1st April, 2011.
Accordingly, your Company is taking necessary steps for the implementation
of Accounting Standards which are converged with IFRS. Basic IFRS training
has also been imparted to concerned senior officials of your Company. Your
Company is gearing up to implement the Converged Accounting Standards
(IFRS) w.e.f. 1st April, 2011 as would be notified by Central Government.
DIVIDEND:
Your Company has a consistent track-record of dividend payment. So far,
your Company has disbursed dividend of Rs. 7,370 crores to the
shareholders.
The Board of Directors of the Company had earlier approved payment of an
interim dividend @20% per equity share (Rs.2/- pet equity share) amounting
to Rs. 253.70 crores paid in the month of December. 2009. Further, the
Board had recommended payment of final dividend @55% per equity share
(Rs.5.5 per equity share) for the year 2009-10.
With this, the total dividend payment for the fiscal 2009-10 will be at 75%
(Rs. 7.5 per equity share) amounting to Rs. 951.36 crores on its paid-up
equity capital of Rs. 1,268.48 crores.
CREDIT RATING:
Your Company has been assigned the highest domestic credit ratings of AAA
from OA and CARE which indicates the highest credit quality and rated
instruments carry the lowest credit risk. The international rating agency.
Moody's international. Hong Kong, has reaffirmed the Corporate issuer
rating of Baa2 and local currency issuer rating of A3 to your Company in
January 2010. Your Company's international rating from Moody's is higher
than the country's sovereign rating. This rating reflects GAlL's leadership
position in natural gas transmission business, the low level of business
risks, favorable outlook for natural gas trade, its robust profitability
and financial position and strengths derived from the significant sovereign
ownership.
CORPORATE STRATEGY:
Your Company has developed Strategic Plan for the period 2007-12. The goal
set by your Company includes doubling of its bottom line by the year 2011-
12. The strategy developed to realize the set goals is as under:
* Gas Sourcing & Marketing:
Tying up with producers and suppliers for marketing and transmission of
natural gas on long term and sustainable basis. This is being realized by
securing more gas from various producers, thereby increasing transmission
and marketing volumes.
* Gas Transmission:
Expanding of pipeline infrastructure from 7.850 km to about 12,000 km with
the laying of new pipelines by 2011-12. For achieving this, execution of
various new pipelines at a cost of around Rs.30,000 crores is in progress.
* City Gas:
Pursuing of City Gas distribution opportunities in various parts of the
country. This requires introduction of Compressed Natural Gas for the
automotive sector and Piped Natural Gas for commercial and domestic use in
more number of cities in a phased manner. The same is being realized by
participating in PNGRB's bidding process for various cities and executing
city gas projects in those cities.
* Petrochemicals:
In the area of Petrochemicals business, your Company is examining possible
options for expansion of its Petrochemical Complex at Pata and is exploring
green field participation in new ventures in India and abroad. For
achieving this, expansion of Petrochemical Complex at Pata is being carried
out in phases and participation in new field ventures is being undertaken
through equity stake, while also exploring new ventures through JV route.
* E&P:
Your Company also plans to strengthen E&P capability and resources to
participate as a major partner / operator in Domestic E&P / CBM bidding.
This would help in developing E&P as a self-sustainable business for
augmenting additional supplies of natural gas. For this, investments are
being made in both domestic on-land and off-shore fields, with a balanced
portfolio of developmental and exploratory projects.
* Globalization:
On the globalization front, the plan is to focus on areas having synergy
with the existing businesses by entering into new and emerging gas rich
countries with focus on sourcing of gas and participation in downstream
activities.
Your Company is also in the process of developing Strategy for the coming
decade. Certain focus areas of diversification have been identified,
besides keeping focus on the core business areas. The strategy for pursuing
such areas is being developed.
SEGMENTAL REVIEW:
Your Company has been consistently achieving the top-most all round
'Excellent' rating by the Government of India, since the commencement of
signing of the Memorandum of Understanding (MoU) with the Government of
India on performance review. During the year under review, the segment wise
business performance of the Company is as under:
* Natural Gas Marketing:
Natural gas continues to constitute the core business of your Company.
During the year 2009-10, Gas Sales was 81.43 MMSCMD compared to 79.06
MMSCMD in the previous financial year. Major supplies of natural gas
includes fuel to power plants, feedstock for gas based fertilizer plants.
Your Company holds around 55% market share in gas marketing in India.
* Natural Gas Transmission:
Your Company owns and operates a network of about 7,850 km of natural gas
high pressure trunk pipeline with a capacity of approx. 150 MMSCMD of
natural gas across the country. The Gas Transmission during the year was
106.74 MMSCMD compared to 83.29 MMSCMD in the previous financial year
registering a growth of 28%. Your Company's share of gas transmission
business is 72% in India.
* Natural Gas Pipeline Projects:
During the financial year, your Company has completed commissioning of
various pipelines having a total length of about 700 km, including Dadri-
Bawana pipeline for supplying gas to Pragati Power Corporation Limited and
Chainsa - Sultanpur Pipeline, which will facilitate supplying about 34
MMSCMD gas to around 65 customers.
* LPG Transmission:
Your Company is the only Company in India which owns and operates pipelines
for exclusive LPG transmission for third party usage. There are two LPG
Pipeline Transmission Systems with a total length of about 1,900 km. 1.300
km of which connects the Western and Northern parts of India and 600 km of
network is in the Southern part of the country. The LPG transmission system
has a capacity to transport upto 3.8 MMTPA of LPG. LPG transmission
throughput was about 3.16 million MT in the year 2009-10.
Petrochemicals:
During 2009-10, your Company has produced 4,17,000 MT of polymer and sold
4,10.000 MT of polymer and has 21% of overall domestic market share. Your
Company also introduced a new pipe grade product PE-100 grade in the
market.
* LPG & Other Liquid Hydrocarbon Production:
Your Company has 7 LPG plants in the country. In the year 2009-10, total
Liquid Hydrocarbon production was about 1.440 million MT which mainly
included 1.1 million MT of LPG, 0.18 million MT of Propane, 0.06 million MT
of Pentane and balance quantity included other products like S8P solvent
and Naptha.
* Exploration and Production (E&P):
During the year 2009-10, hydrocarbon discovery has been made in Tripura
Onland E&P block. Approval of Cabinet Committee on Economic Affairs (CCEA)
has been obtained for investment in Field Development Plan for A-1 and A-3
E&P blocks in Myanmar and also for participation in the associated onshore
midstream pipeline. Development of the blocks A-1 and A-3 is in progress
and the Gas production is expected to start from May, 2013. The Petroteum
Exploration License for Cauvery Onland E&P block has been granted by
Government of Tamil Nadu, where your Company is an Operator and the said
block has been awarded during NELP-VH bidding round. The petroleum
operation of the aforesaid block has already commenced.
Your Company has participating interest in 27 E&P blocks and 1 CBM block.
Out of these, 24 E&P blocks are in India and 3 blocks are overseas (A-1 and
A-3 blocks in Myanmar and Block 56 in Oman). The on land block in Cambay
basin is generating revenue and the revenue generated during the year is
Rs. 32 25 crores.
Your Company is operating two onland E&P blocks viz. Rajasthan Onland and
Cauvery Onland.
* Coal Bed Methane:
Your Company has participating interest in 1 Coal Bed methane block (in
Chattisgarh state). The block is in first exploration stage. Exploration
activities like drilling of core holes have been completed and drilling of
test wells is planned.
* Telecommunications:
Leveraging on its pipeline network, your Company has built up a strong
Optic Fibre Cable (OFC) network for leasing of bandwidth as a carriers'
carrier. Your Company's telecom business unit - 'GAILTEL has approximately
13.000 km of OFC network.
SEGMENTAL OUTLOOK:
* Natural Gas:
Major focus for your Company is to maintain its dominant position in the
gas business, especially the transmission segment and continue the
relationship with existing customers and also add more customers.
Therefore, your Company is building about 7,500 km of pipelines to
transport and supply natural gas to various customers in Power, Fertiliser,
Refinery, Industries, CGD projects etc. These would include large trunk
pipelines, along with smaller pipelines which would provide connectivity
among trunk lines to form a grid.
* Natural Gas Pipeline Projects:
Your Company is executing various pipeline projects for about 7.500 km of
pipeline passing through 16 states, at an approved project cost of around
Rs 30,000 crores. When these pipelines are commissioned, the gas
transmission capacity is expected to increase from 150 MMSCMD at present to
around 300 MMSCMD.
Your Company has received approval / authorization in the year 2007 for the
following five new natural gas pipelines in the country from the Ministry
of Petroleum and Natural Gas (MoPNG), covering a length of around 5,500 km:
* 610 km Dadri - Bawana - Nangal pipeline passing through UP. Delhi,
Haryana and Punjab.
* 350 km Chainsa - Gurgaon - Jhajjhar - Hissar pipeline passing through
Haryana and Rajasthan.
* 2050 km Jagdishpur - Haldia pipeline passing through West Bengal,
Jharkhand. Bihar and U.P.
* 1389 km Dabhol - Bangalore pipeline passing through Maharashtra and
Karnataka.
* 1114 km Kochi - Kanjirkkod - Bangalore / Mangalore pipeline passing
through Kerala. Tamil Nadu and Karnataka.
In addition to these, your Company will be augmenting the capacities or its
two existing pipelines, namely, Dahej (Gujarat) - Vijaipur (Madhya Pradesh)
pipeline and Vijaipur (Madhya Pradesh) - Dadri (Uttar Pradesh) pipeline,
having a length of around 2,000 km.
Your Company has taken initiatives to transparently execute the projects
without any time & cost over-runs through meticulous Project Monitoring.
* Petrochemicals:
Your Company owns and operates a gas based integrated petrochemical plant
at Pata, Uttar Pradesh, with a capacity of producing 4,10,000 TPA of
Polymers i.e., HOPE and LLDPE. Your Company is in the process of installing
an additional gas cracking furnace, after which, the capacity will further
increase up to 430.000TPA.
Your Company is currently in the process of setting up a 2.80.000 TPA
Petrochemical Plant in Assam, at an investment of about Rs. 5,460 crores
through its subsidiary. Brahmaputra Cracker and Polymer Limited (BCPL).
* Gas Sourcing:
Your Company continues to have focus on securing gas supplies from
international markets. LNG and trans-national pipelines are the two
prevalent modes of cross border gas trade and your Company has been making
efforts to bring more natural gas into the country.
* Wind Energy:
Your Company has successfully commissioned a wind energy project of 4.5 MW
capacity at Sinoi (Anjar), District Bhuj in Gujarat, at a cost of Rs. 27.7
cores, in March, 2010. The generated power is fully utilized for captive
consumption at your Company's installations in Gujarat, namely, Gandhar,
Kandla and Samakhali.
Based on the successful commissioning and satisfactory performance of this
project, your Company is planning to go for commercial wind energy projects
in different states.
BUSINESS INITIATIVES:
* Global:
Your Company is continuously scouting for overseas business opportunities
in the natural gas sector. The purpose is to have long term growth in core
business areas and also to source natural gas to meet the growing
requirements of the Indian market.
Your Company aims to target the African market owing to its high gas
reserves and nascent gas infrastructure. Your Company is a part of the
consortium which includes Shell. Total. PTT & other companies for bidding
in the Nigerian Gas Master Plan (NGMP) project in Nigeria. Your Company is
also looking for opportunities in countries like Ghana, Egypt, Papua New
Guinea (PNG), Qatar etc. Your Company has signed an MOU with Egyptian
Natural Gas Holdings Company (EGAS) for cooperation in gas sector projects
in Egypt. Your Company is also shortly opening an office |