British Gas Allowed To Hike Stake In Mahanagar Gas

The Foreign Investment Promotion Board (FIPB) has allowed British Gas to hike its stake in Mahanagar Gas Ltd, a joint venture between Gas Authority of India Ltd (GAIL) and British Gas, to 50 per cent till December 1999.

At present, both British Gas andGas Authority of India Ltd are equal partners in Mahanagar Gas.

But their stakes were envisaged to come down to 35 per cent after offering 20 per cent to the public and 10 per cent to the Maharashtra government.

The approved foreign equity is 35 per cent amounting to $6 million, which will eventually go up to $15 million.

 

But, the depressed market conditions have prevented it from tapping the market and compelled it instead to temporarily increase foreign equity.

The company considers it inappropriate to come out with an issue now because of the weak market conditions and the capital-intensive nature of the project.

The company was permitted to distribute natural gas, initially from Bombay High and later from other sources, to domestic industries and commercial and transportation consumers.

To tide over the cash crunch, Mahanagar Gas plans to raise Rs 20 crore in short-term loans from financial institutions.

Sources state that though presently Mahanagar Gas has accumulated losses of over Rs 5 crore, these would be wiped out once it starts recovering dues from its consumers.

The joint venture company has decided that the expenditure incurred by it at the residences of the consumers for the supply of gas would be borne by the latter.

Since this has not been implemented strictly, the expenditure is outstanding in the balance-sheet as 'losses'.

Once the recoveries are made, sources say, the losses would be almost completely wiped out.

The authorities are concerned about the slow progress of the project. Of the targeted 15,000 connections, Mahanagar Gas has provided only 5,000 domestic connections so far.

The company is supposed to offer one million connections in 10 years.