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Pipeline cost shoots up on Gail whim

New Delhi, Oct. 15: State-run Gail India Ltd’s specification of longitudinally-welded pipes in the tender for laying down the Dahej-Vijaipur pipeline, instead of spirally-welded pipes, has resulted in an additional project expenditure of Rs 450 crore.

Sources said around 3-lakh metric tonnes of longitudinal pipes were supplied by Mann Industries, Welspun and the Jindal family-controlled Saw Pipes at a hefty price of $920 per tonne.

Longitudinal pipes require wider steel plates to produce and are not manufactured by domestic steel companies. Consequently, steel plates are imported, which jacks up prices of these kinds of pipes.

However, spiral pipes are manufactured from steel plates which are produced by domestic steel companies. Steel prices have been volatile on the global market with London Metal Exchange prices for finished steel fluctuating.

“This has resulted in an additional loss of more than 25 per cent to the government exchequer,” sources said.

Industry experts said spirally-welded pipes have global acceptance, similar to the longitudinally-welded pipes, in the oil and gas sector. “Moreover, norms as per the American Petroleum Institute (API) already specify the usage of both types of pipes for these kind of projects,” the official said. “The spiral pipes also strictly conform to the safety parameters,” he said. “The use of spirally-welded pipes also boost revenue of domestic steel firms and at the same time would reduces project costs by 25-30 per cent.”

However, Gail officials refused to comment. Chairman and managing director, P. Banerjee said: “I am busy in a meeting.” The director of projects, S. P. Rao, was busy in a conference call.

Experts said countries like China, Malaysia, Canada and Turkey extensively use spirally-welded pipes for laying down oil and gas pipelines.

Sources said, that while consulting firm Tractebel Engineering advised Gail to use longitudinally-welded pipes in the Dahej-Uran pipeline project, it asked Gujarat State Petronet Limited (GSPL) to use spirally-welded pipes for the Baroda-Kalol pipeline project.

“In both the cases the lithographical and other conditions were the same,” said the official.

During the first quarter period (April-June) of 2003-04 financial, Gail has reported a net profit of Rs 365 crore on sales of Rs 2,923.18 crore. The country’s eighth largest listed company by turnover, it reported revenues of Rs 11,780 crore for the financial year-ended March 31, 2003.

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