GAIL(India) Ltd (GAIL) Q2 FY23 Earnings Concall Transcript

GAIL(India) Ltd (NSE: GAIL) Q2 FY23 Earnings Concall dated Nov. 04, 2022

Corporate participants:

Nitin Tiwari — Investor Relations

Shri Rakesh Kumar Jain — Director (Finance)

Analysts:

Probal Sen — ICICI Securities — Analyst

Mayank Maheshwari — Morgan Stanley — Analyst

Sabri Hazarika — Emkay Global — Analyst

Varatharajan — Antique Limited — Analyst

Kirtan Mehta — BOB Capital Markets — Analyst

S. Ramesh — Nirmal Bang Equities — Analyst

Maulik Patel — Equirus Securities — Analyst

Kishan Mundhra — Systematix — Analyst

Somaiah V — Spark Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to GAIL (India) Limited Q2 FY ’23 Earnings Conference Call hosted by Yes Securities Limited. [Operator Instructions]

I now hand the conference over to Mr. Nitin Tiwari from Yes Securities Limited. Thank you, and over to you, sir.

Nitin Tiwari — Investor Relations

Thanks, Lizan. Good day, ladies and gentlemen. On behalf of Yes Securities, I welcome everyone to GAIL (India) Limited’s Second Quarter FY ’23 Earnings Call. We have the pleasure of having with us the senior management team of GAIL led by the Director of Finance, Shri Rakesh Kumar Jain. I will now hand over the call to Mr. Jain for his opening remarks, which shall be followed by a question-and-answer session. Over to you, sir.

Shri Rakesh Kumar Jain — Director (Finance)

Thank you, Mr. Nitin, and good afternoon to you and to all the investors and analysts community connected with this conference call for GAIL’s earnings for Q2 H1 ’22-’23. The fiscal and financial performance for the quarter ended September ’22 is already with you and same has also been made available in the GAIL’s website. As you are aware that there have been supply disruptions from GMTS under the contract from the end of May ’22, and GMTS has not delivered 13 numbers of schedule LNG cargo until September 2022, during financial year ’23. In total, 17 cargoes till date, 13 in Q2, and still date, 70. Subsequently, GAIL has taken up various measures to maintain reliable and sustainable supplies to its downstream customers, LNG customers by — and by reducing its own internal consumption, procurement of additional volume for the spot market and imposing suitable curtailment of supplies. Moving on to the financial highlights. GAIL achieved gross turnover of INR38,440 crores in the current quarter as against INR37,536 crores in quarter one financial year ’22-’23. There is a marginal increase by 2% — approximately 2%, mainly due to higher natural gas prices, as this increase has been offseted by — the increase could have been more, but has been offseted by a decrease in LST prices, which is approximately INR12,000 per metric tonne, this is for electric prices and approximately INR10,000 per metric tonne for petrochemical prices.

Profit before tax for Q2 decreased to INR1,876 crores in current quarter as against INR3,894 crores in quarter one financial year ’22-’23. And actually, this is down by 52%. In terms of amount, INR2,018 crores. And this is mainly due to a decrease in gas marketing spreads, lower petrochemical and LSP price realizations, increase in fuel expenses in natural gas transmission due to the allocation of domestic gas, 0.45 MMSCMD, from Gas Transmission segment with effect of 16th August 2022. On what — which was partly offset by increase in other income, mainly dividend income in this quarter, INR568 crores. Profit after tax decreased to INR1,537 crores as against INR2,915 crores in the quarter one of financial year ’22-’23, and this is down by approximately 47%. On a half yearly basis, GAIL achieved a turnover of INR75,976 crores as against INR38,829 crores in first half of last financial year, that is ’21-’22. This is an increase of approximately 96%, and this increase is mainly on account of increasing in natural gas prices, both domestic and RLNG, higher price realization in petrochemicals and Liquor Hydrocarbon segment. There is a marginal increase in profit before tax, that is by 1%, to INR5,770 crores as against INR5,736 crores in the corresponding quarter last year. Profit after tax has remained almost flat that is INR4,452 crores for the half year as against INR4,393 crores in the corresponding quarter last year. Coming back to the segmental performance for the current quarter as against the previous quarter, that is Q2 financial year ’23 versus Q1 financial year ’23. Gas Marketing filters of volume is stood at 92.54 MMSCMD in current quarter as against 100.84 MMSCMD in previous quarter. The decrease in volume is due to lower RLNG sales and overseas sales. The natural gas transmission is stood at 107.71 MMSCMD in current quarter as against 109.47 MMSCMD in previous quarter.

If you talk of capacity utilization, this is almost 32% capacity utilization. Volume of production is stood at 95 TMT as against 132 TMT in last quarter. The production has decreased due to lower availability of fuel stock on account of supply disruptions from GMTS LST production is stood at 228 TMT as against 227 TMT in previous quarter. The capacity utilization was 63%. LPG transmission was 1,100 TMT as against 1,055 TMT in previous quarter. The capacity utilization was at 115%.. Now I’ll take up consolidated financials of Q2 versus Q1 financial year ’23. The consolidated turnover in current quarter is stood at INR38,674 crores versus INR37,901 crores in previous quarter. This is also up approximately by 2%. The PBT in current quarter is INR1,675 crores versus INR4,230 crores in Q1 financial year ’23. This is down by approximately 60%. The profit after tax is INR1,315 crores versus INR3,253 crores in Q1 financial year ’23. Again, this is down by approximately 60%. On half yearly basis, if I talk about consolidated results, the consolidated turnover in H1 ’23 is stood at INR76,575 crores. versus INR39,290 crores in previous corresponding period, and this is up by approximately 95%. The profit before tax for financial year ’23 is stood at INR5,905 crores versus INR6,268 crores in H1 2022. This is down by approximately 6%. The PAT is INR4,568 crores in the first half of current financial year, that is ’22-’23, versus INR5,021 crores in H1 of last year, that is ’21-’22, down by 9%.

Now our GAIL CGD business, GAIL is having infrastructure of 123 CNG stations and two lakh twenty seven DPNG connections. During the financial year ’22-’23 till September I’m talking. three in CNG stations and around 25,500 new DPNG connections were added. In the next two years, we have target to add around 100 new CNG stations and 2,50,000 new DPNG connections.. Now about GAIL Gas, there is another 100% subsidiary of GAIL City Gas Distribution. During the current quarter, the gross turnover is stood at INR2,716 crores as against INR2,663 crores in Q1 financial year ’22-’23, an increase of 2%, mainly due to increase in average sales price. The profit before tax was reported at INR101 crores in current quarter as against INR97 crores in previous quarter. The profit after tax has declined marginally due to INR71 crores as against INR72 crores in previous quarter. The physical volume during the quarter was stood at 5.5 MMSCMD as against six MMSCMD. GAIL Gas along with its JV subsidiary has infrastructure of eight lakh DPNG connections and 348 CNG stations. During Q2 financial year ’22-’23, seven new CNG stations and 11,104 new DPNG connections were added. During April to September ’22, nine new CNG stations and 32,488 new DPNG corrections were added. In terms of capital expenditures, GAIL achieved capital expenditure of INR3,967 crores during the first half of current financial year. And this capital expenditure is mainly on pipelines, petrochemicals, CGD projects, operational capex, equity contribution and E&P. We have planned to spend approximately INR7,500 crores in the current financial year on the similar areas, pipelines, petrochemicals, CGD.

This means we have already incurred more than 50% by the end of first half of the current financial year. Project performance during this quarter, GAIL has commissioned Jamshedpur spur line in length of 123 kilometers, Ranchi spur line having a length of 4.6 kilometers under the Pradhan Mantri Urja-Ganga project on 1st September 2022. This will facilitate gas supplies shortly from grid to City Gas Distribution Network of Jamshedpur and Ranchi. Now let me share with you about our acquisition of JBF petrochemicals Limited. GAIL has been declared as a successful resolution applicant by the Committee of Creditors for acquiring JBF Petrochemicals Limited through corporate insolvency resolution process and received affirmative vote of 100% of the members of COC by value and GAIL’s submitted to NCLT for approval. That’s all from my side regarding the overview of the performance and project performance. The management of the company is now available, and we were glad to clarify any questions that you may have.

Now hand over — I hand over to you, Mr. Tiwari. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Probal Sen from ICICI Securities.

Probal Sen — ICICI Securities — Analyst

Am I audible to you, sir?

Shri Rakesh Kumar Jain — Director (Finance)

Can you — yes, you are audible. Bit louder, please, it will be helpful.

Probal Sen — ICICI Securities — Analyst

Sir, is this better?

Shri Rakesh Kumar Jain — Director (Finance)

Yes. Perfectly.

Probal Sen — ICICI Securities — Analyst

Okay. sir, three questions from my side. One, you obviously mentioned about the decrease in gas marketing spreads for this quarter. I just wanted to get — if you can share a little bit about what kind of reduction you saw? Because if we look at the basic differential between spot LNG prices and Henry Hub, that decline doesn’t quite sort of explain the extent of decline we have seen in our profits.. So is there something we are missing? Is there a lag in terms of those prices? Or were there specific cargoes that were redirected in this quarter that has led to the decline in gas trading profits? That was my first question, sir.

Shri Rakesh Kumar Jain — Director (Finance)

Yes. So you want to take one by one or should I answer that?

Probal Sen — ICICI Securities — Analyst

As you wish, sir. I can ask the second and third question. I’ll go ahead.

Shri Rakesh Kumar Jain — Director (Finance)

There is no single reason for the reduction in gas marketing spread. First, if we compare with Q1 of this financial year, it is a significant fall. But Q1 of this financial year, we have seen a significant growth in the marketing spread because of the marketing condition we had at that point of time. And secondly, there was no supply disruption in Q1 as prices of LNG and RLNG was significantly higher. So one thing that we have to — we — if you compare with Q1, certainly, you will find a significant fall. But nevertheless, there is a fall. So the — the reason for fall is, if you talk in terms of normal circumstances, are 2, three reasons, which actually are contributing to this fall. First is, as I have shared in opening remarks that GAIL has stopped supply from — last Q1, they supplied some cargoes. But from July onwards, they have stopped supply. This supply forms a significant portion if we talk of RLNG of gas portfolio of GAIL that is 20%. If we talk of overall portfolio, it’s around 20%. And if we talk of in terms of volume, it is around nine MMSCMD, 8.5 to nine MMSCMD. So what GAIL did GAIL was continuing to supply until we started making to our customers from 16th of July.

We gradually actually started cutting. But 16th of July, we started cutting and we brought down the fertilizer suppliers to take-or-pay level. So that is one thing which has reduced our marketing spread. Second to balance sustainable operations, we also started applying these cuts to other customers at varying take-or-pay level, which varies 50%, 60%, 70%. So in terms of volumes you are seeing, we have gone down. So that is one reason. Second, we as a company are committed to own our contracts. So even though Gazprom was not supplying the volumes, but in order to fulfill our contractual commitments, we continue to source gas and supply to our customers. And you know the market, what is the market in Q2. Market was significantly different than the price under the long-term contracts. So that is the second reason which led to decreasing our marketing spread, and these are the two major factors which have contributed to reduction in our marketing spread.

Probal Sen — ICICI Securities — Analyst

That’s extremely helpful, sir. The next question I had was with respect to the polymer output, again, the lower supplies continues to sort of contribute to lower output from this segment. Just wanted your sense of how we should look at the second half of the year, sir? Is there any way that we can actually at least improve the output? or given the ground realities right now, we can expect sort of somewhere in that 100 to 110 TMT range for at least the polymer business until our supply situation is resolved? How should we look at it, sir?

Shri Rakesh Kumar Jain — Director (Finance)

So this segment is an area of concern for us as well. If you see, if we have reduced the supply cuts to our downstream customer, as a prudent operator, we also thought let’s also reduce our internal consumption to petrochemical plants. So that we are able to sustain pipeline operation and able to supply if I say the proportionate to almost all the users, including internal consumers. So that’s how we started reducing our production at Pata Petrochemical. Second thing which we led to reduction is Pata petrochemical is that while we don’t have a long — the sustainability of operations for a longer period on a spot gas is difficult. Actually curtailed our operations at Pata during second quarter of this financial year. Coming on to your expectations, how we will do in quarter two or maybe quarter three are coming, yes, we are reviewing the situation constantly. And what we find that market has improved at least for a moment, significantly. I’m talking of current moment because LNG price, when I am talking to you, it may have changed. So market currently supports that we are — we at least start our productions to a better level. So if you talk in terms of 100 to 110, we also expect that we ramp up to that level at least in this quarter, and we are actually taking all measures, including sourcing of cheaper gas from domestic and international market so that we have production at that desired level.

Probal Sen — ICICI Securities — Analyst

Got it. Got it. Last question, if I may, sir. On the JBF acquisition, what kind of time lines are we looking at? Is it too early in the status to be talking about numbers right now? And what kind of investment — if you can give us any sense what kind of investment will be required from our side apart from whatever is available in terms of debt?

Shri Rakesh Kumar Jain — Director (Finance)

So JBF Petrochemicals, it’s a legal process now where the matter is with the NCLT. So difficult to predict any legal process with time line. But as a GAIL, I can expect that may take three months to maybe some more into six months’ time for conclusion of that process. And beyond then, we are parallelly working on various actions so that we are able to reduce our time line for making this project operational. If everything goes fine, we expect that we will commission the plant within 24 months, 24 months, and it is start production. So if I assume — I’m already using the word assume. If ’23 is the line — time line when we actually get this all legal processes so from there, you can assume that two years will be sufficient to

Probal Sen — ICICI Securities — Analyst

So somewhere in FY ’26, we start operations, give or take a few months, sir?

Shri Rakesh Kumar Jain — Director (Finance)

Not ’26, ’25.

Probal Sen — ICICI Securities — Analyst

Okay. Okay. Okay. Got it, sir.

Shri Rakesh Kumar Jain — Director (Finance)

Coming back to your question with respect to investment, so we expect that around INR2,000 crores, INR1,800 crores, INR2,000 crores. This is actually an estimate we made at the time of when we were working for this project. But this actual will be maybe significantly less or around that — the investment which will help enable us to make this plant operational.

Operator

The next question is from the line of Mayank Maheshwari from Morgan Stanley.

Mayank Maheshwari — Morgan Stanley — Analyst

Just a few follow-ups on the petrochemical side as well as how you’re kind of managing the gas trading side. Can you just give us out of the 8.5, nine MMSCMD, how much volumes that you got impacted? How much of that you had to make up by sourcing LNG on a spot basis? And how much were you able to kind of reduce your volumes towards the petrochemical plant? That’s my first question.

Shri Rakesh Kumar Jain — Director (Finance)

Okay. So on an average basis, we are not receiving 8.5 to nine million Gazprom MMSCMD, okay? So we have been able to reduce some around 2.7 to fertilizer plants, around similar levels to other customers. And then depending on the — because we ran the Pata plant at full capacity, then we ramped down to 30%, 40%, so it is varying for Pata plant. So we reduced around three million — three MMSCMD for Pata plant in — if we talk on an average basis for the last one to two months. So that’s how we actually mitigated our shortfall from Gazprom. But this has happened not on a day. Actually, this has happened on different point of time. Like I said, we stopped supply of — we curtailed supply of fertilizer plant from 16th July. So that time, we were supplying full. So for those intermittent, we had resourced LNG cargoes. Numbers, can you please?

Nitin Tiwari — Investor Relations

Around 1, 1.5 cargoes…

Shri Rakesh Kumar Jain — Director (Finance)

Around 1, 1.5 cargoes per quarter.

Nitin Tiwari — Investor Relations

In this quarter, Q2.

Shri Rakesh Kumar Jain — Director (Finance)

In this quarter. Around 1, 1.5 cargoes, we sourced from international market to mitigate the shortfall even after doing all these — taking all those measures.

Mayank Maheshwari — Morgan Stanley — Analyst

And sir, is that a number that you will have to now source regularly for the next few quarters?

Probal Sen — ICICI Securities — Analyst

Actually, this situation, I am telling, yes, we require LNG. We may have to source maybe one to two cargo per quarter, but this situation is so dynamic. And there are 2, three factors arise that. First is that whether to source LNG because we are significantly sourcing that now from domestic market also including So to that extent, we source. Second, we don’t know — sometimes customers also goes for shutdowns that enables us not to source the gas. Yes, if still, we may require to source the gas. But the numbers will be difficult to say whether it will be one cargo or two cargo. But certainly, we will be requiring some gas from international market LNG.

Mayank Maheshwari — Morgan Stanley — Analyst

Got it, sir. Sir, my second question was more related on the petrochemical side, both in terms of the strategy and the thinking process around the JBF acquisition as well as you talked about the petrochemical current operations. When you are kind of thinking about the current prices for petrochemicals, at what level of LNG are you comfortable to ramp that utilization rates up? Because I’m just trying to think you are trying to maximize the volume per molecule. So where are you kind of seeing the level at which you can kind of see higher profitability on the spot LNG price basis?

Shri Rakesh Kumar Jain — Director (Finance)

So first, I will answer JBF. GAIL has been in the business of petrochemicals since 1999, almost we are there for 23 years. And we have been very successful as far as the production and marketing is concerned. There is a good amount of customer base and a lot of satisfaction with all the customers. So we thought we should leverage our ability to this kind of projects. And that’s how we chosen to acquire this project. So this is actually in terms of synergy with our business and also, if you say, for diversification a little bit. So this is our thinking about JBF. What was your second part of this question?

Mayank Maheshwari — Morgan Stanley — Analyst

Sir, I was just thinking more from a perspective of the existing petrochemical capacity itself. How are you kind of thinking about at what levels of LNG will you be comfortable in ramping the utilization

Shri Rakesh Kumar Jain — Director (Finance)

Yes, got it. So it is difficult to say what are the petrochemical plants because the level — sustainable level are two factors. One is the, what is the market price of petrochemicals. It is also significantly changing time to time. It has — we have seen even in this year, 1,25,000, 1,27,000. We are now seeing around the level of 1,15,000. So this is one factor which determines the level at which we will be able to sustain. So if I give you any number, which actually will be depending on the prices.

Mayank Maheshwari — Morgan Stanley — Analyst

But at least today, you are comfortable to ramp it up. That’s the way we should think about.

Shri Rakesh Kumar Jain — Director (Finance)

No. Today, we are operating it because of two things. Yes, we are comfortable because we could source the gas from domestic market. And being a portfolio holder, we are able to source gas for our petrochemical plant. Yes, we are comfortable to certain level because if the more gas is available, we’ll ramp up, but we are still not ramping up to a full capacity.

Operator

The next question is from the line of Sabri Hazarika from Emkay Global.

Sabri Hazarika — Emkay Global — Analyst

Sir, I have two questions. Firstly, as of today, what is the petrochemical utilization? So is it operating at 40%, 45%? Or it’s different from that?

Shri Rakesh Kumar Jain — Director (Finance)

Yes, 30%, 40%.

Sabri Hazarika — Emkay Global — Analyst

Is it at around 40% right now, right?

Shri Rakesh Kumar Jain — Director (Finance)

Yes.

Sabri Hazarika — Emkay Global — Analyst

Okay, sir. Second question is relating to the — I think I missed out when you spoke in the opening remarks regarding the diversion of your internal consumption gas to the CGD sector, I guess. So what exactly was the dynamics? How much were you like consuming internally? And how much of it was it diverted to CGD sector? And can it happen going forward again because CGD demand is growing? So could there be like more diversion to this CGD mix? That’s my second question.

Shri Rakesh Kumar Jain — Director (Finance)

We expect from 16th August, our allocation for internal consumption for use as a fuel gas for HVJ pipeline has been reduced by 0.45 MMSCMD so — in order to supply or back up the requirement of CGD. That’s the situation. And what was the second part of your question?

Sabri Hazarika — Emkay Global — Analyst

So this is out of how much 0.45…

Shri Rakesh Kumar Jain — Director (Finance)

1.55 is total allocation, has been reduced to 1.10.

Sabri Hazarika — Emkay Global — Analyst

Okay. And going ahead, if the CGD demand is going up, say, second, third quarter, fourth quarter, it goes even further, since we don’t have that much of APM gas, is there a possibility that this remaining 1.1 will also go down to 0?

Shri Rakesh Kumar Jain — Director (Finance)

Hazarika, anything that can happen. It is not correct on my part to speculate anything because there are some domestic gas available, which can also system, which are not currently coming up because of the lake of connectivity with the pipeline. So it depends on dynamics. And there may be possibility. I’m not denying, but I cannot say so.

Sabri Hazarika — Emkay Global — Analyst

Right. And just a follow-up on this that your average tariff realization has actually gone up during Q2 versus Q1. So was it some sort of a pass-through of this? Or is it like a natural increase?

Shri Rakesh Kumar Jain — Director (Finance)

No, no, no. It’s not a pass-through. You see that our volumes are gradually increasing on the Jagdishpur-Haldia pipeline.

Sabri Hazarika — Emkay Global — Analyst

Right, right, right.

Shri Rakesh Kumar Jain — Director (Finance)

So Jagdishpur-Haldia pipeline, even with Stage one tariff, it’s significantly higher than any of the pipelines tariff. So when the volume supply is increasing to the Jagdishpur-Haldia pipeline, it will lead to increasing weighted average tariff realization. It is not to any increase of pass-on of fuel consumption and all that. That benefit we will be getting subsequently when PNGRB revises the tariff, but currently it is not because of that.

Sabri Hazarika — Emkay Global — Analyst

Right. Right. And your transmission volumes have also not fallen that much, considering the fall in marketing volumes. So why this deviation?

Shri Rakesh Kumar Jain — Director (Finance)

There are — certainly, the other suppliers have supplied to consumers using our pipeline because they are — they continue to supply. This disruption is in our supply side, not on the supply side with other shippers. So has that not been there, our volume would have been.

Sabri Hazarika — Emkay Global — Analyst

Right, right. So you’re seeing some other sources have made up for what has been the

Shri Rakesh Kumar Jain — Director (Finance)

Not made up. Let me put it different way. Because our supply disruptions are there it has gone down by eight million. Other continues to supply because there is no such challenge at least to our knowledge with other suppliers domestically.

Operator

The next question is from the line of Varatharajan from Antique Limited.

Varatharajan — Antique Limited — Analyst

A couple of questions. One on follow-up of the reallocation of domestic gas for pipeline operations. What is the gas which is filling in the void at this point in time? Is it like LNG or some other source? And you are saying that whenever the tariff revision happens, it will get compensated. When do you expect that to happen?

Shri Rakesh Kumar Jain — Director (Finance)

Sorry, your voice was not very clear to me. Pardon me, just repeat it.

Varatharajan — Antique Limited — Analyst

One second. Is it better now, sir?

Operator

Sorry to interrupt, Mr. Varatharajan. Can you use the handset mode while speaking and other speaker phone?

Varatharajan — Antique Limited — Analyst

Is this better?

Shri Rakesh Kumar Jain — Director (Finance)

Yes.

Varatharajan — Antique Limited — Analyst

My question was on the deallocation of domestic gas, what is the gas which is filling in for the deallocated one? Is it LNG at this point in time? And as far as the…

Shri Rakesh Kumar Jain — Director (Finance)

So it’s RLNG.

Varatharajan — Antique Limited — Analyst

Okay. So it is likely to remain RLNG? Or do you think even we able to bring in some other source

Shri Rakesh Kumar Jain — Director (Finance)

It is likely to be RLNG unless we are able to source some market-driven price gas from domestic sources, till that time, it is RLNG.

Varatharajan — Antique Limited — Analyst

And on the tariff part, you mentioned when the tariff provision we’ll get compensated. When do you think that is likely to happen?

Shri Rakesh Kumar Jain — Director (Finance)

Actually, you see the — in terms of tariff regulations, the fuel cost is part through. And the tariff revision because this is pertaining to HVJ, tariff was last revised in June 2019. In terms of tariff order, it is supposed to be revised now. So we are in the process of submitting the tariff to PNGRB. And we expect them to take — normally, they take three to six months, we expect that to be available maybe next calendar — beginning calendar year or maybe financial year.

Varatharajan — Antique Limited — Analyst

Fair enough, sir. My second question was on the CNG that you volume you sold as part of GAIL Gas as well as you are standalone

Shri Rakesh Kumar Jain — Director (Finance)

Sorry, once again…

Varatharajan — Antique Limited — Analyst

So you’re talking about GAIL Gas volume of 5.5 MMSCMD. Out of which, how much was CNG?

Shri Rakesh Kumar Jain — Director (Finance)

Sorry, I don’t have a ready available answer what is CNG, but we can off-line answer it.

Operator

The next question is from the line of Kirtan Mehta from BOB Capital Markets.

Kirtan Mehta — BOB Capital Markets — Analyst

You referred about sort of resorting to additional sourcing from domestic market, including IGL. What sort of quantum are you sourcing from this?

Shri Rakesh Kumar Jain — Director (Finance)

Let me answer you this way that it cannot be a certain quantum because it’s based on, first, availability at IGL, how much gas is available at IGL. But in recent past, we have sourced a good amount of RLNG or gas, maybe 25 million to 30 million during this last one month only.

Kirtan Mehta — BOB Capital Markets — Analyst

25 million to 30 million — could you clarify the units, sir?

Shri Rakesh Kumar Jain — Director (Finance)

Unit means totality. I’m not talking MMSCMD. I am talking in terms of quantum.

Kirtan Mehta — BOB Capital Markets — Analyst

Right, sir. And in terms of the capex plan for the H2, which are the key pipelines which will get commissioned during the second half of the year?

Shri Rakesh Kumar Jain — Director (Finance)

So the pipeline primarily the Jagdishpur-Haldia pipeline, the — some of the lakhs of the Jagdishpur-Haldia pipeline will be commissioned and Dhamra-Angul — majorly Dhamra-Angul.

Kirtan Mehta — BOB Capital Markets — Analyst

From the capex portion, which are the other major deliverables which would come through in the second half of the year?

Shri Rakesh Kumar Jain — Director (Finance)

So it is only pipeline, mainly on pipeline only this year.

Operator

The next question is from the line of S. Ramesh from Nirmal Bang Equities.

S. Ramesh — Nirmal Bang Equities — Analyst

So the first thought is, if you look at your Gas Transmission segment, is there any loss year booking in any of the sections already commissioned in JHBDPL? And when do you expect the JHBDPL project to start generating EBIT positive?

Shri Rakesh Kumar Jain — Director (Finance)

JHBDPL tariff is not negative because you see — let me give a total perspective about JHBDPL. JHBDPL pipeline, we envisage a capex of around INR15,000 crores. And if we consider net of grant, I’m giving rounded figure, it is INR10,000 crores. Currently, the tariff for JHBDPL has been worked out by PNGRB based on almost INR1,800 crores, if we talk of less of grant around INR1,500 crores or so. And that tariff is INR65, almost INR65 per MMBtu. So the tariff which has been notified by PNGRB is only for Phase 1. Based on the capital expenditure, net of grant is around INR1,500 crores. If we see that way, then we are significantly in a good position, we are not negative or positive. And the capex we have already incurred, which is for the Phase II and beyond, so that tariff will come any time from now, and that will — on time value of money, that will be determined based on time value of money since that has not yet been given by PNGRB, though we have incurred the capex. If you see that way, so that tariff will be available to us in coming maybe next year. So it’s not even negative if we consider those capex. If we consider total capex without considering commensurate tariffs, certainly, you can say we may be negative, but we are not because that tariff has to come considering the capex incurred in prior periods, maybe next year.

S. Ramesh — Nirmal Bang Equities — Analyst

So if you were just to take this discussion further, when the entire JHBDPL is in operation, when do you expect that? And what are the kind of volume you can handle, say, from FY ’24 or ’25? And what is the kind of ballpark incremental EBIT we should expect per GM or in rupees crores? If you can give us some sense of that to be useful.

Shri Rakesh Kumar Jain — Director (Finance)

So actually, I don’t have already EBIT available. But yes, I can give two things that this pipeline will be almost — this is 16 MMSCMD pipeline, and we also got it expanded to 23 million if you consider Dhamra and So this pipeline will be almost fully utilized if we talk of two years from the — from today because we have customer available for this pipeline. And this will be — we will be able to utilize. And as we convert into PNGRB regulation and the pipeline, even if you utilize 75%, we will be having 12% post tax income.

S. Ramesh — Nirmal Bang Equities — Analyst

Okay. And the second thought is on the Gas Marketing, we heard that you had to buy spot gas at about $40. So have you incurred any loss on any lot of gas you have procured from the spot market in the last quarter? And what is the current profitability run rate for Gas Trading segment based on the current and spot prices?

Shri Rakesh Kumar Jain — Director (Finance)

So I did not say that we bought at $40. I don’t know where from you heard.

S. Ramesh — Nirmal Bang Equities — Analyst

I read it from press news. This is a press report, yes.

Shri Rakesh Kumar Jain — Director (Finance)

No, no, I don’t know what press report. We had purchased LNG from a spot market, I said 1, 1.5 cargo last quarter we purchased and we are likely to purchase a similar quantum in next quarter. So since this is sourcing we are doing in order to fulfill our commitments in the downstream market. So the loss or the figure you are trying to know that what kind of impact we may have, the impact will be at what price we are able to source because it’s so dynamic. Nowadays, the energy in international market is available $21, $25 ranging depending at what time you go to market. So the loss will be based on that if — suppose it further comes down, there may not be lost. If it goes up, there may be lost. So it Is very difficult to quantify, but we only we buy to fulfill our commitments in the downstream market and that to be ballpark number of one or 1.5 cargo per quarter.

Operator

The next question is from the line of Maulik Patel from Equirus Securities.

Maulik Patel — Equirus Securities — Analyst

Sir, do you have anything to share with the Committee, which is government has formed.

Operator

Sorry to interrupt, Mr. Patel. We are not able to hear you clearly.

Maulik Patel — Equirus Securities — Analyst

Yes. Am I audible now?

Operator

Sir, slightly. Can you use a handset mode while speaking?

Maulik Patel — Equirus Securities — Analyst

I’m in handset mode.

Operator

Sir, because your audio is not clear.

Maulik Patel — Equirus Securities — Analyst

So I will just try to speak a little louder. Sir, any update you have with respect to the Committee?

Shri Rakesh Kumar Jain — Director (Finance)

No, we don’t have any update. We are also like you.

Maulik Patel — Equirus Securities — Analyst

Okay. Sir, in case of the government or the Committee reduced the APM gas price from the current level of $8.5 to $6. You will see significant benefit in your transmission and also on your LPG business, right? That is one, correct?

Shri Rakesh Kumar Jain — Director (Finance)

Yes. You — actually not on transmission business because, as I shared, it’s more or less pass-through. But yes, on LPG, we will be benefited.

Maulik Patel — Equirus Securities — Analyst

You will be benefited. And sir, as you mentioned earlier also with the earlier questions that the tariff of the pipelines are likely to come up. And what we understand that PNGRB base is in busy finalizing the changes in the tariff framework. So when that’s likely to come? In next couple of months, is it possible that the new tariff framework will come?

Shri Rakesh Kumar Jain — Director (Finance)

So I’m also guessing like you. So based on my meeting and understanding from them, the changes in tariff regulation may come this month.

Maulik Patel — Equirus Securities — Analyst

This month. Okay. Got it, sir. And sir, last question, with respect to the demand perspective, you mentioned that the spot LNG has now come down to $20, $25 per MMBtu, right? And then which was very high in the previous month. Do you see improvement in demand from the customers, particularly from the refining customers, which has switched back to the liquid in the last couple of months?

Shri Rakesh Kumar Jain — Director (Finance)

Certainly, ours is a price-sensitive market. Any dip in the price will certainly bring at least new demand, though even existing demand may also increase, but certainly, it levels and bring new demand.

Maulik Patel — Equirus Securities — Analyst

So at what level do you expect the refinery segment to come back to the gas of the LNG market

Shri Rakesh Kumar Jain — Director (Finance)

Actually I about refinery.

Nitin Tiwari — Investor Relations

Not refinery. Even this current size, which they are slightly softer prices and it’s not making sense what I understand for the refinery sector. And for any purpose plant, it takes time to plan to switch over from one fuel to another fuel. So whereas the current phenomenon needs to be seen how long it continues.

Maulik Patel — Equirus Securities — Analyst

Sir, the last question. When do you expect this breakwater facility at commission work will be completed?

Shri Rakesh Kumar Jain — Director (Finance)

We expect next year terminal to full weather terminal completely This is the last season — this was the last season when we could not have the advantage of having cool weather. March ’23 time line.

Maulik Patel — Equirus Securities — Analyst

Okay. And sir, what’s the progress on the Dhamra where you have…

Operator

Sorry to interrupt Mr. Patel. May I request that you return to the question queue. The next question is from the line of Kishan Mundhra from Systematix.

Kishan Mundhra — Systematix — Analyst

Question from my end. So sir, there is some 12 MMSCMD of high pressure, high temperature gas from RIL that is supposed to come for bidding. So sir, would you be looking to bid aggressively on that given that your gas from volumes are not coming in, number one? And number two, will you also be bidding, let us say, on behalf of smaller CGD companies because they’re finding difficult to bid on their own?

Shri Rakesh Kumar Jain — Director (Finance)

Right. Second portion, I will reply first. Unless somebody approaches us, how can I bid on others behalf. As a marketer, certainly, I will bid. But on the — if I have to bid on somebody’s behalf, they have to come to me. And we can always look for that. But coming back to first question, yes. As a major gas marketer here of the company, we always look for sourcing the gas at a competitive price, which is acceptable to domestic customers, we’ll certainly do that.

Operator

The next question is from the line of Somaiah V from Spark Capital.

Somaiah V — Spark Capital — Analyst

So the first question was one to 1.5 cargoes that you bought…

Operator

Sorry to interrupt, Mr. we’re not able to hear you.

Somaiah V — Spark Capital — Analyst

Yes. Is it better now?

Operator

Yes, much better.

Somaiah V — Spark Capital — Analyst

This one to 1.5 cargoes that we have sourced, so the end prices for these cargoes would either have been oil linked or gasoline. So is it fair to understand that these cargoes being procured from the spot, so would have been a loss-making proposition. Is that the right understanding?

Shri Rakesh Kumar Jain — Director (Finance)

Actually, yes, if you really see only financials, you can say so. But it’s not because of that, we are buying, no entrepreneur will do that. It is to fulfill our commitment because of disruptions in gas supply, we are sourcing the gas to only fulfill those shortfalls, which are required to fulfill our contractual commitment. So it varies depending on the shortfalls we have. And in order to meet that shortfall, we will be certainly sourcing. And to the extent there is a difference in the long-term prices and the price at which we source, there will be profit or loss.

Somaiah V — Spark Capital — Analyst

Understood, sir. Just a follow-up on this. So we said we had cut 2.7 to fertilizer and 2.7 to other customers. So which means this 5.4 is not part of take-or-pay. So we are okay cutting it without having any payments that need to be made from our side for cutting this 5.4. Is that the right understanding?

Shri Rakesh Kumar Jain — Director (Finance)

It’s right understanding. Rather, if you have gone through the contract, there is a level below of take-or-pay. There is supplier pay. We are not operating for major customers, the supplier pay. So there is no question of any penalty at take-or-pay level. That is our contractual commitment.

Somaiah V — Spark Capital — Analyst

Okay. Just one last question, sir. In terms of volume ramp-up for Urja-Ganga, in terms of fertilizer plants, what is the status? And overall, next couple of years, how do you see volume being ramped up in the Urja-Ganga pipeline? if you can give an MMSCMD number, it should be helpful.

Shri Rakesh Kumar Jain — Director (Finance)

For Urja-Ganga now, most of the — there are four fertilizer plants has already been running since last more than a year. And Gorakhpur has got commissioned more than six months ago. Barauni, Sindri are almost on the verge of getting commissioned. They will be expecting commissioning in December month. So with this, we have four fertilizer plants almost now ramped up. If we add up all these fertilizer volumes, they will be around 7.5 MMSCMD of RLNG plus other smaller customers and CGD players will make it finally by the next financial year in the range of nine to 10 MMSCMD.

Operator

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.

Shri Rakesh Kumar Jain — Director (Finance)

Thank you very much. I think we were able to answer most of the questions. But one question which I said I will be answering offline. If the question — if was whether — the question asked was what is the CNG sales as a part of total sales by GAIL Gas. Out of almost 5.5, 0.5 MMSCMD CNG sales by GAIL Gas. So that question, I’ll answer. I think we were able to answer most of the questions. If any of the participants has got some more questions, which they could not ask or they may have, they can contact our Investor Relations team. We’ll be happy to answer those questions. Thank you.

Operator

[Operator Closing Remarks]