Days after GAIL (India) Ltd. decided to cancel Rs. 210-crore worth contracts for the Tamil Nadu component of its Kochi-Koottanad-Mangalore-Bangalore pipeline, Petronet LNG Ltd. has initiated the process of leasing a part of the storage capacity of its terminals in Kochi from where natural gas was to flow into the pipeline.

Behind both the decisions is a seemingly common underlying cause — the cross-country pipeline implementation running into rough weather. Farmers in seven districts of Tamil Nadu, through which it is to be laid, and their State government want the pipeline to be taken along national highways and not cut across farmlands.

The decision to cancel the pipeline laying contracts of the GAIL board, officials of the public sector company say, should not be construed as a move to abandon the 310-km Tamil Nadu portion. Hoping the pipeline project will make headway after the elections, an official added a call on the Tamil Nadu component was unlikely before the outcome of a case in the Supreme Court.

Viability of the Rs. 3,200-crore project as well as the Petronet LNG’s Kochi terminal depend on the number of customers. Maintaining that the farmer protests were more political, the officials said the pipeline would fuel development, improve power supply and help generate employment. GAIL intends to approach Tamil Nadu government again with a plea to take a fresh look.

Petronet LNG, inviting expression of interest from LNG supplies, traders and terminal operators, said it planned to lease a portion of the storage capacity for short to medium-term.

On the fallout for Karnataka, a GAIL official said taking a cue from Tamil Nadu, farmers of Kerala were also opposing the project, but the government there was supportive. The ‘Y’ shaped project, whose length in Karnataka was relatively less, promises long-terms gains for industries and supply of eco-friendly CNG for automobiles.

Though a spur line from the Dabhol-Bangalore pipeline could supply natural gas to Mangalore and nearby areas, a lot depends on its capacity.

Federation of Karnataka Chambers of Commerce and Industry Secretary General Sudarshan Tirunarayan is for the States to allow GAIL to complete the project as per schedule as it would benefit immensely by way of assured supply of gas at fixed rates.

Industry clusters in Bangalore North were looking forward to faster completion of the project, which would also facilitate growth of the MSME units in various districts of Karnataka.

Resolving the issue

The Chemical Industries Association in Chennai, which believes the issue could be resolved through discussions involving Tamil Nadu government, farmers and GAIL, and offer of appropriate compensation, said cancelling of the contracts is probably a precursor to GAIL deciding to give up the project once and for all.

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