Chairman’s Statement

Chairman’s Statement

for the 29th AGM of GAIL on 25th September, 2013

Dear Shareowner,

It is with a sense of pride that on behalf of the entire Board of Directors, I welcome you to this 29th Annual General Meeting of your Company. I feel honoured and privileged to share with you that your Company was conferred with the coveted Maharatna status on 1st February 2013 by the Government of India. This is the first AGM of your Company after becoming a Maharatna. Your Company is the Youngest Public Sector Enterprise (PSE) and one amongst seven PSEs who have attained this status. This is yet another recognition by the Government of India of your Company’s efforts and potential to emerge as the global energy major of India.


The Directors’ Report and the Audited Accounts for the year 2012-13 are already with you and with your permission, I take them as read. You will certainly share my sense of satisfaction at yet another year of robust growth of your Company. This performance is even more heartening given the subdued global and domestic economic environment.


Economic Scenario


During the year, the global economic landscape remained challenging. Europe continued to grapple with unsustainable debt burden while there were some positive signs of improvement in the US economy.


The year has been equally tough for the Indian industry also. The economy, impacted by lower GDP growth, mounting fiscal deficit and high Current Account Deficit saw slow momentum in infrastructure and energy sectors. Investment and capital expenditure by the industry slowed down. Inflation and depreciation of the Indian Rupee further aggravated the situation.


Since India is an energy deficit country, its import dependency is rising on a continuous basis. As a result, any fluctuation in international price of Crude Oil, which is interlinked with price of gas, stokes domestic inflation and Current Account Deficit. The volatility in Oil prices has been putting burden on the sovereign finances and also eating into competitiveness of the Indian economy. At the same time, energy plays a crucial role in achieving the social and economic welfare of over 1.21 billion people in the country. It is perhaps the most vital enabler for growth and development. However, a large majority of India’s people do not have access to clean and modern sources of energy. Thus, it is extremely important to meet our domestic energy needs adequately and affordably.

This places a big responsibility on your Company to not only secure adequate natural gas but also make it available to people and industries at competitive prices. As India moves forward in its journey to be a low-carbon economy, the emphasis on natural gas will rise further. Natural Gas currently comprises around 10% of India’s energy basket which may reach 15% by 2020. Accordingly, your Company is engaged in several initiatives to source gas from various suppliers worldwide.

Business Performance


I am happy to share that your Company has once again maintained its ‘Excellent’ performance rating under the MoU 2011-12 with the Government. Amidst an uncertain economic environment, your Company achieved a record turnover of Rs. 47,333 Crore in 2012-13, registering a growth of 18% against previous year. Net profit increased by 10% to reach Rs. 4,022 Crore. This sustained financial performance was driven by an increase in Natural Gas trading and better sales realization in Petrochemicals and Liquid Hydrocarbon business.


Maintaining a consistent dividend payment record, the Board of Directors of your Company have recommended the highest ever dividend payment for 2012-13. Earnings per share increased from Rs. 29 per share last year to Rs. 32 per share in 2012-13.


Your Company took several initiatives to meet India’s spiralling energy needs. Your Company added 1,300 km of new gas pipelines to its network during 2012-13, thereby increasing its pipeline network to 10,700 km having a capacity to transport 210 MMSCMD gas. With commissioning of two new pipelines, namely Dabhol-Bengaluru and Kochi-Koottanad-Mangalore/Bengaluru Phase-I, your Company has entered new markets in the southern states of Karnataka, Goa and Kerala. Commissioning of the PLL LNG terminal at Kochi will allow your Company to serve customers in Kerala also. Thus, your Company moved a step closer towards expanding its network to 15,000 km and 300 MMSCMD capacity by 2014-15.

The year 2013 began with successful commissioning of the Dabhol LNG terminal at Ratnagiri, Maharashtra by your Company as Owner’s Engineer. This LNG terminal will act as the gateway for supply of natural gas to the country’s southern and western parts. Your Company will be commercial operator of the terminal for the next 25 years. Your Company also entered into an understanding with Petronet LNG Limited for reserving 2.5 MMTPA exclusive capacity in the planned expansion of Dahej LNG terminal to meet the increasing demand of gas.

I am glad to inform that your Company is successfully moving ahead in its efforts to secure uninterrupted and competitive gas supply to meet the domestic market needs. The onset of current financial year marked the signing of a Terminal Service Agreement with M/s Dominion Cove Point LNG LP for booking 2.3 MMTPA liquefaction capacity in the Cove Point liquefaction terminal in the US. The US subsidiary of your Company has contracted half of Dominion’s capacity for 20 years. Your Company will now have access to 5.8 MMTPA of LNG linked to Henry Hub prices.

In another milestone for your Company, it executed a long-term Gas Sale and Purchase Agreement with Gazprom Marketing and Trading Singapore Ltd. for supply of 2.5 MMTPA LNG per annum from its Shtokman production facilities over a period of 20 years. Your Company is also pursuing the Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline project for import of gas from Central Asia to India. To address the immediate concern of domestic supply shortage, your Company concluded two mid-term LNG supply agreements with Gaz de France of France and Gas Natural Fenosa of Spain. In addition, your Company continued to import spot cargoes during this financial year.


Your Company also signed an MoU with EDF Trading of the US for cooperation in the areas of North American upstream equity investments, gas supply to export facilities and LNG supply optimization. This will pave the way for first international trading operations of GAIL. I am pleased to share that your Company’s participation in the A-1 and A-3 offshore Exploration & Production blocks in Myanmar began generating revenue after the Consortium commenced production and sale of the gas to the buyers in July 2013.

In the downstream segment, your Company is currently doubling existing capacity at Pata Petrochemical plant. The project is expected to be completed by end of the current financial year. By 2015, your Company would have marketing rights for 1.7 MMTPA polymer. For handling such a large portfolio, your Company is strengthening its petrochemical trading capability as well as scaling up its distribution network. On the gas retail side, your Company is targeting 40-50 new Geographical Areas for City Gas Distribution through its subsidiary and joint ventures.

Your Company is taking a keen interest in the renewable energy sector particularly in wind and solar energy. It has graduated from being a captive producer to a commercial producer in the area of wind energy. Further, 5 MW Solar Plant was commissioned in February 2013 in Rajasthan under the Jawaharlal Nehru National Solar Mission.


Business Responsibility and Sustainable Development


Your Company’s roadmap for growth takes into account the creation of sustainable societal value in an environmentally responsible manner. During the year under review, it allocated around Rs. 92 Crore towards CSR programmes. During 2012-13, over 2800 under-privileged youth in remote areas of Madhya Pradesh, Gujarat and Andhra Pardesh were successfully trained in various job-oriented skills under Project Swavalambh while over 2000 slum-dwelling women were provided skills training under project Garima.


Under the Padho and Badho initiative, 7500 slum children were enrolled in the 250 Non Formal Education centres in and around Delhi. This will pave the way for their inclusion into the formal government school system. I am also happy to share that during last financial year, 23 students of GAIL Utkarsh programme for underprivileged children have made it to various IITs.

In the area of Health Care, over 2 Lakh poor patients in 240 remote villages of Uttar Pradesh and Madhya Pradesh have been provided free primary healthcare through our Mobile Health Programme. Through initiatives like these, we have touched the lives of lakhs of people around us.


Your Company released its second sustainability report for 2011-12 titled “Shaping the Future”. It evolved Sustainability Aspirations 2020 to set an overall direction for sustainability in the organization. Your Company also developed a green belt spanning over 17 million square metres, which is over 41% of your Company’s total landholding.


Corporate Governance


Your Company believes in enhancing stakeholder wealth by adopting best practices of corporate governance. For the 4th consecutive year, your Company received “NIL” comments from Comptroller & Auditor General of India for 2012-13. This underlines its commitment to the best accounting and disclosure practices. Your Company has been complying with the requirements of Corporate Governance as enunciated in the Listing Agreement and DPE Guidelines on Corporate Governance.

Your Company deploys the best-in-class technology to make continual improvement in its governance frameworks. It has adopted several new IT initiatives like implementation of Joint Venture Accounting system for Exploration & Production business on SAP platform. It initiated implementation of enterprise-wide Pipeline Integrity Management System for its cross-country pipeline network based on Geographic Information System.

Your Company’s role in building a sustainable energy future has been recognized time and again. It received several recognitions during the financial year 2012-13. Your Company was adjudged Company of the Year in three categories by Petroleum Federation of India i.e. for Oil & Gas Pipeline Transportation, Environmental Sustainability and Project Management. It also received various laurels in the area of occupational health and safety.


Looking Forward


Your Company has identified the key focus areas for growth in the coming decade. It aspires to emerge as a global hydrocarbon major with significant upstream, midstream and downstream interests by 2020. 

It will focus on maintaining leadership position in domestic gas and petrochemical businesses. To develop India’s gas market, your Company will continue pipeline network expansion and build new re-gasification capacity. It will strengthen trading capability further to address domestic and international markets. Focus will also be on acquisition of equity stakes in producing assets or liquefaction facilities abroad, international gas sourcing to meet short and mid-term requirements, and consolidation of E&P portfolio while developing technical expertise.

Your Company is also planning to venture in LNG shipping to bring the contracted LNG to India. In addition, it will continue to expand the City Gas Distribution network through Joint Ventures and Subsidiaries.

Your Company will intensify its efforts for sustainable growth. It has continued to display strong leadership to pursue higher regional cooperation amongst Asian energy companies on matters of mutual and long-term interest.

To meet the ever changing business requirements and to maintain sustainable competitive advantage, your Company is giving significant thrust on developing its human resources to their full potential. The process of aligning HR Strategy with Organizational Strategy is a continuous process in your Company.

The Maharatna status provides your Company with greater operational flexibility and higher empowerment to pursue business expansion and diversification in India and overseas. It will further empower your Company to play a pivotal role in the country’s socio-economic development, and expand its global footprint for enhancing India’s energy security.



On behalf of the Board of Directors, I take this opportunity to express my gratitude to all stakeholders including the Ministry of Petroleum and Natural Gas, Government of India, Petroleum and Natural Gas Regulatory Board and all departments of the Central and state governments for their co-operation and support and demonstrating their confidence in our abilities.


On behalf of the Board and the employees of your Company, I thank all our customers for their continued support and belief in us. I would also like to acknowledge the contribution of each and every employee in your Company’s achievements, and I am sure that their efforts will lead to significantly better performance in the coming years. I would also like to thank my fellow Board Members for their unflinching support and guidance.


Thank you once again, ladies and gentlemen.  

                                                                             B.C. Tripathi

   Chairman & Managing Director

25th September 2013


Note: Excerpts from the Chairman’s speech at the 29th Annual General Meeting held on the 25th September, 2013 at New Delhi. This does not purport to be a record of the proceedings of the Annual General Meeting.

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