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Government yet to approve Gujarat State Petroleum Corporation, Adani deal

The shareholder agreement between Gujarat State Petroleum Corporation and Adani Group for developing a LNG terminal at Mundra was submitted three months back for approval to the Government but the decision is still pending.

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More than three months after the shareholder agreement between Gujarat State Petroleum Corporation (GSPC) and Adani Group for developing a LNG terminal at Mundra was submitted to the government, there is no word yet as to when and whether the agreement will be approved.

“The shareholder agreement was submitted to the state government in March first week. It is being thoroughly examined but is yet to be approved,” said government sources.

Energy minister Saurabh Patel confirmed that the agreement was yet to be approved. “The shareholder agreement signed by the two sides is being examined by various departments. A decision will be taken in due course,” he said.

The shareholder agreement for the proposed Rs2,500 crore LNG terminal at Mundra was signed between Adani and GSPC on February 23, and it was submitted to the government soon after. An oil & gas industry expert said that the long time being taken by the government to approve the deal was highly surprising, especially considering the stakes involved, and the crucial nature of the project.

Sources said that GSPC’s decision to give 50% stake in the project to Adani is what is delaying the approval. The original plan was that GSPC would hold 50% stake in the project, with Adani and Essar holding 25% each. However, GSPC decided to rope in Adani as an equal partner after Essar walked out of the project.

“The decision to rope in Adani as an equal partner, and not a junior partner, in the project is the reason why the state government is taking its time studying the agreement before approving it,” said government sources.

According to sources, the energy department has recommended that the 50:50 shareholder agreement be approved, and the file was now being examined by finance department.

Officials said the approval would be given soon. “The government knows very well that Adani will not wait forever. Adani could simply walk out of the deal and go ahead with its plans to develop the terminal on its own. The government will not let such a situation arise,” they said.

According to the agreement signed, GSPC and Adani will have equal representation on the board of the proposed company. The company’s chairman will be from GSPC, while the MD will be an Adani nominee.

The LNG terminal project will comprise LNG receiving, re-gasification and gas evacuation facilities. It will have an initial capacity of 5 million metric tonne per annum. Work on the project is slated to be completed in 36 months of the Zero Date.

The Mundra terminal will be the third LNG terminal in Gujarat after the Shell LNG terminal at Hazira and the Petronet LNG terminal at Dahej.

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