Gujarat Gas to Merge with Three State Energy Firms; GSPC to Cease Operations

Milind Torwane, Managing Director of Gujarat Gas, stated that merging Gujarat Gas with three Gujarat government energy companies will create synergies and ensure a sustainable future for the new entities formed from this process. However, this merger will result in the dissolution of the four-decade-old Gujarat State Petroleum Corporation (GSPC).

Explaining the rationale behind the reorganisation of GSPC (exploration, production, and gas trading), Gujarat State Petronet Ltd (gas transmission), GSPL Energy Ltd (gas trading), and Gujarat Gas (city gas distribution), Torwane quoted, “During the last restructuring, the companies were not on equal footing—GSPC was still in debt, while Gujarat Gas was newly acquired. Over the past 7-8 years, GSPC, GSPL, and Gujarat Gas have become debt-free, with an average annual Profit After Tax (PAT) of ₹1,000-1,200 crore for the last 2-3 years. With all three companies now on equal footing, any combination, whether merger, demerger, or amalgamation, will not impose a burden on the other entities. Secondly, looking at the challenges in the energy sector, it is better to synergise within the Group and grab the opportunities. The challenge will be to cater to the new energy market. The energy scenario is changing fast, and there is a growing demand for energy.”

GSPC will cease to exist

For the fiscal year 2023-24, GSPC reported a turnover of ₹18,452 crore, GSPL had ₹2,031 crore, GEL recorded ₹131 crore, and Gujarat Gas achieved ₹16,293 crore. “Until we receive regulatory approvals from entities such as the Securities and Exchange Board, all three companies—GSPC, GSPL, and GEL—will continue to operate as they are. Once approvals are granted, there will be only two entities: Gujarat Gas, which will manage exploration, trading, and city gas distribution, and GSPL Transmission Ltd, which will handle the transmission business. Gujarat State Petroleum Corporation Ltd (GSPC) will cease to exist,” Torwane said. Originally incorporated as Gujarat State Petrochemicals Ltd in 1979, GSPC was notable for its controversial discovery of 20 trillion cubic feet (tcf) of gas in the KG Basin in 2005. The company later acquired Gujarat Gas from British Gas in 2013.

Gujarat Gas is set to gain additional strength following its merger with GSPC. Previously a city gas distribution (CGD) entity, Gujarat Gas, will expand its operations to include upstream activities such as natural gas sourcing. "The merger will broaden the customer base, increase revenues, and enhance margins. Previously, margins were split between Gujarat Gas and GSPC. Now, as a single entity managing gas sourcing and distribution, Gujarat Gas will enjoy streamlined benefits," an official explained.

The volume and revenue for the new transmission company emerging from this merger are expected to remain stable. However, GSPL India Gasnet Ltd, which operates the 765-km Mehsana-Bhatinda natural gas pipeline, and GSPL India Transco Ltd, responsible for the 1450-km pipeline from the Krishna Godavari basin in Andhra Pradesh to Bhilwara in Rajasthan, will be transferred to GSPL Transmission Ltd.

Additionally, other GSPC investments will be integrated into Gujarat Gas. This includes GSPC LNG Ltd, which operates a 5 million tonnes per annum LNG terminal at Mundra, as well as two gas-based power plants: GSPC Pipavav Power Co Ltd with 700 MW capacity and Gujarat State Energy Generation Ltd with 350 MW. Some renewable power plants totalling 100 MW will also be included.