GAIL to save on falling steel prices

State-run gas utility GAIL India, which has lined up multi billion dollar investment in laying new natural gas pipelines, will see savings in project cost because of falling steel prices, a company official said.     

"Steel prices have fallen by over 50 per cent in international market since January and naturally it will help us cut project cost," he said.     

To benefit from this trend, the company may re-tender sections of the Dahej-Vijaipur pipeline upgrade project.     

GAIL had divided the project into four sections and invited bids in January this year. Six companies — Jindal SAW, Welspun, PSL, Man Industries, Ratnamani and Corinth of Greece — submitted price bids.     

Jindal Saw was the lowest bidder for one section, quoting a steel price of $680 per tonne while Man Industries quoted $907 per tonne to be lowest in the other three sections.     

Since there was a 33 per cent price difference between the two lowest bidders, it was prudent to renegotiate the price with Man or re-tender the three sections, he said, adding the differential cost came to Rs 144 crore.     

The official said GAIL had in March 2008 saved Rs 470 crore by re-tendering a section of the Vijaipur-Dadri-Bawana pipeline project.     

Expert opinion obtained by GAIL also favoured a re-tender of the three sections of the Dahej-Vijaipur pipeline.

The official said in March 2008, PSL was the lowest bidder for one section of the Vijaipur-Dadri-Bawana pipeline at Rs 63,000 per tonne while Welspun had bid Rs 105,000 per tonne for the other section to be lowest bidder.     

GAIL decided to re-tender Welspun's portion, keeping in view the abnormal price differential. After re-tendering, prices dropped to Rs 52,800 per ton, helping the company save Rs 470 crore.     

The official said as per CVC guidelines, renegotiating prices with the lowest bidder based on a budget the company may have prepared after reopening bids is not allowed. "Therefore, there cannot be any re-negotiation with Man Industries and so the only option available is re-tendering."