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GAIL (India) Ltd
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Good day, ladies and gentlemen, and welcome to the Q3 FY '20 Earnings Conference Call of GAIL (India) Limited hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Deep Shah from AMBIT Capital. Thank you, and over to you, Mr. Shah.
Thank you. Hello, everyone, and welcome to 3Q FY '20 Results Conference Call of GAIL (India) Limited. Today, we have from the management, Mr. A.K. Tiwari, Director of Finance; and other senior executives. Now I would like to hand over the floor to the management for opening remarks, post which we can open the floor for questions. Thank you, and over to you, sir.
Thank you very much. Thank you. Once again, I wish you a belated happy new year 2020. The new year has brought a lot of festivities with it. I'll take this opportunity to wish you belated happy Makar Sankranti, Pongal, Lohri, Vasant Panchami and our national festival, Republic Day.A very good evening to everybody, and welcome to GAIL first earnings call of the decade. At the outset, I would like to thank all the esteemed members of the investors and analysts fraternity that you have taken out your precious time and shown keen interest in the result and performance outlook of GAIL (India) Limited.We have already declared the Q3 FY '20 results earlier today, and the same is also available on GAIL website. I'm sure that you had an opportunity to go through the same.I would highlight the segment-wise physical and financial performance of GAIL for the quarter ending December 31, 2019, along with major factors contributing the same.As you know, that the oil and gas has witnessed subdued prices over the recent past, mainly due to supply overhang and bleak demand outlook. The price realization, particularly polymer and liquid hydrocarbon prices, have been stressed during the past few quarters. I want to share with you that even such a volatile environment, GAIL has been able to perform fairly well in the given circumstances. The performance we have achieved during the quarter and the year-to-date was not without our share of challenges. Not only we have faced them, but also succeeded to build a robust organization capable of delivering under adverse conditions.Now let me give some insight for the quarter. I would like to share the physical first. There have been robust physical performance during Q3 in almost all segments as compared with the previous quarter Q2.Gas Trading has increased by 1.3 MMSCMD from 94.72 MMSCMD to 96.02 MMSCMD. Total LNG cargoes sold outside India is 12 in Q3 FY '20 as against 9 in Q2 FY '20. Gas Transmission has increased by 1.7 MMSCMD from 108.7 MMSCMD to 110.35 MMSCMD, mainly due to increases in [ seaport ] volume.LHC production is fairly stable during this quarter. LHC sales also saw a marginal increase. LPG transmission also increased fairly by 44,000 metric tonnes. So the physical performance during this quarter was -- in all the segments was up. I would like to share the financials now. During the quarter ended December 31, 2019, GAIL has achieved gross turnover of INR 17,735 crores versus INR 18,010 crores in Q2 FY '20, which is decreased by 2%. PBT is INR 1,872 crores in Q3 FY '20 versus INR 1,535 crores in Q2 FY '20, increase of 22%. The PAT is INR 1,251 crores in Q3 FY '20, in comparison to INR 1,064 crores in Q2 FY '20, increase of 18%.The average price realization of petrochemical has decreased by [ 4,000 ] [Technical Difficulty]
Ladies and gentlemen, the line for the management is disconnected. Please stay on hold while we reconnect them.Ladies and gentlemen, thank you for patiently waiting. We have the line for the management reconnected. Over to you, sir.
Yes, yes. So here, I would like to highlight the fact that up to Q3 FY '20 versus up to Q3 2019, the prices of polymer has reduced by approx INR 19,500 per metric tonne, which alone has an impact of INR 1,100 crores on the profitability.Similarly, for LHC segment, the prices have gone down by approx INR 7,000 per metric tonne, which has impacted the profitability of around INR 600 crores up to Q3 FY '20 versus Q3 FY '19. Even this has major setback on account of external factors, GAIL has been putting all-out efforts, including cutting the input costs, operational efficiency, et cetera, to mitigate the impact and maximizing the profit.I'm pleased to announce and inform that the Board of the company has today approved an interim dividend of INR 6.4 per share, which will entail a dividend payout of INR 2,882 crores (sic) [ INR 2,886 crores ]. This is the highest-ever interim dividend payment by the company in terms of total dividend amount. Up to Q3 ended December 2019, GAIL has achieved CapEx of INR 3,813 crores, mainly in the pipeline and other contributions towards equity.The total CapEx of JHBDPL project, that is, Jagdishpur-Haldia & Bokaro-Dhamra Pipeline up to Q3 FY '20 is INR 8,800 crores. And the total commitment is around INR 13,000 crores, of which we have received the grant of INR 3,221 crores from the government.The project [indiscernible] [ Gorakhpur ] section of JHBDPL is going on, and the connectivity to Matix Fertilizer is likely to be completed by end of financial year. And sale of 2 -- approx 2.5 MMSCMD to Matix Fertilizer may start.The Dhamra-Angul Pipeline, Bokaro-Angul Pipeline, Vijaipur Auraiya Pipeline are expected to be commissioned by December '20.The section 1 of KKBMPL, that is Kochi-Koottanad-Mangaluru Pipeline is already commissioned, and Kochi to Koottanad-Bengaluru section is under advanced stage of completion and commissioning, which will be commissioned by March 2020.Further pre-commissioning activity at Ramagundam Fertilizers & Chemicals plant has already started. Daily supplying gas to plant for pre-commissioning activity and after commissioning, the gas supply to the extent of 2 MMSCMD will commence.After inauguration of CGD at Jamshedpur on 1st November 2019, the gas supply of all 6 CGDs awarded to GAIL, that is, at Varanasi, Patna, Cuttack, Bhubaneswar, Ranchi and Jamshedpur has started and volume are slowly ramping up.There was a request from the analysts to include performance of GAIL Gas Limited. I'm happy to share with you that, up to Q3 FY '20, GAIL Gas has achieved a turnover of INR 2,675 crores, PBT of INR 167 crore and PAT of INR 109 crores. As we stated, this profit for 3 quarters of FY '20 is more than the profit for the full year FY 2019. In FY 2019, GAIL Gas has earned PBT of INR 126 crores and PAT of INR 81 crores.During the 3 quarters for the current year, GAIL Gas has added 13 new CNG stations and more than 50,000 new domestic connections has been connected. The performance of GAIL Gas has been excellent and is expected to improve over the year on account of ramping of new CGD volumes. Further, I would like to inform and share that the Cabinet Committee of Economic Affairs has approved the transfer of administrative control of Brahmaputra Cracker and Polymer Limited, our subsidiary for -- from Department of Chemical and Petrochemical, to the Ministry of Petroleum and Natural Gas. The government has granted a feedstock subsidy of INR 4,600 crores for 15 years to maintain the IRR at 10%. And if you see the consolidated account, INR 930 crores in Q3 FY '20 has been accounted on account of the feedstock subsidy in the books of accounts. So you will find that in the consolidated, there is a jump in that.GAIL, along with other companies through JV companies, IGGL, Indradhanush Gas Grid Limited, is implementing the gas pipeline infrastructure in Northeast district for over 1,600 kilometers with target cost of around INR 9,265 crore. To improve the development of gas infrastructure in Northeastern states, the government has approved the viability debt funding of 60%.Government of India has given an irreversible option to adopt new tax rate that is 25.168% during FY '19/'20. The new option is under evaluation, and a final decision will be taken before the close of the annual accounts.I would like to share the impact of Union Budget on GAIL. In the Union Budget 2020, the finance minister announced extending the National Gas Grid from the current 16,200 kilometers to 27,000 kilometers. This indicates continued emphasis of the government on expanding the footprint of natural gas in the country. GAIL is already undertaking projects having total length of around 5,000 kilometers. This will provide impetus to the expansion plan of national gas sector, and GAIL being a dominant player in the natural gas will remain in focus. Government's continuous emphasis on CGD will further help to enhance the natural gas market in India.I would like to add here the environment, social and governance issues. The company places significant emphasis on environment and sustainability. GAIL has been included in FTSE4Good Index series for third year in a row. GAIL's major sustainability initiatives includes reuse of treated Effluent Treatment Plant water at GAIL Vijaipur, leading to saving of 1 lakh liter of water per day, enhancement of recycling water pipeline network of GAIL at GAIL Vijaipur, leading to saving 3 lakh liter of water per day; development of Rich-Lean natural gas corridor, resulting in flexibility in operation and optimization of pipeline operations; higher recovery of products at [indiscernible] plant and for [indiscernible]. We believe in building trust among our key stakeholders and assure them transparent corporate governance, principled and efficient and responsive services.I would like to state that GAIL is following higher standards for [ services ] and upkeep of its assets. We have been achieving all physical targets of LHC and polymer production with 0 major reported accident -- incidents. HSE Score has been devised on measurable parameters against each element of HSE Management System. Monthly HSE Score for the year 2019/'20 is computed 96, against the excellent target of 94.5 The company takes risk-mitigation management very seriously. It has a formal risk management structure in place and it is reviewed regularly by the top management. And various risk-mitigation measures are taken against challenges that exist in the internal and external environment.As a responsible corporate citizen, GAIL has taken various initiatives under CSR. The total spending of GAIL on CSR projects is higher than the mandated 2% of the profit.I would like to mention that the management is taking all possible efforts to maintain, improve the profitability while continuing to maintain its operations safe and sustainable. The company is targeting to optimize cost and to improve the operational efficiency. Superior performance, extraordinary customer services, timely completion of projects and cost optimization are our key focus areas. With proper focus on cost and efficiency and innovation, I'm confident the company will be able to boost margins and scale new heights. GAIL has taken several digital initiatives to make company technology-driven, moving towards the Digital Yatra during the quarter. We have taken various measures to digitize [ implied scale ] as well as for our payment to the contractors and suppliers.Further, GAIL organized industry lead on digital transformation with the significance of building greater synergies in leveraging emerging tech, digital technologies, such as machine learning, advanced analytics, cloud, digital tools for the mutual benefit of individuals, organizations as well as the industry working for its future sites. I would like to share the burning -- you can say, the very important news which is coming in the news flow regarding the ADR, GAIL received the notice wherein DOT, Department of Telecommunications, has shown an outstanding amount of [ INR 1.83 lakh crores ] including interest and penalties, computed on the entire revenue of GAIL. As already intimated by GAIL, the company has refuted the claim being an unrelated matter to the terms of license. Based on the legal opinions sought and facts of the case, the company is of the view that the claims are not legally tenable and no amount is due or payable under the said notice. The company has also filed an application with the Honorable Supreme Court on 23rd of January for seeking clarification, public direction on judgment part.I think I have conferred the major highlights of the company, and now our team will be happy to take your questions. Thank you very much.
[Operator Instructions] The first question is from the line of [ Yash Gupta ] from Angel Broking.
Congrats on the good set of numbers. My question is on the long-term contracts. That the long-term contracts are linked to the group; and how do supplier link to the demand in India? And what rate they are links to?
You were asking about the long-term contracts which we have entered into?
Yes, yes. Yes, sir.
So we have tied up customers here itself as well as we are sitting in the international market, wherever the opportunity is there.
Back-to-back tie-up is there.
Back-to-back tie-up is there. And some of the volumes, we are also selling into international markets. And depending upon the volatility, we are also... So it is a continuous process.
Sir, we have taken that particular risk on -- in overhang?
There is risk. I think we have presented the results. And where the Gas Trading is there, and you have seen the margin, you have the segmental profit. So there is a risk.
The contracts are natural hedges. So if there is a back-to-back agreement, it's a pass-through as far as we are concerned.
Okay. And sir, in past 6 months, the natural gas prices have significantly come down. So in this long-term contract, do we have any renegotiable contracts, renegotiable clause?
With the supplier?
Yes.
No. No, we don't.
These are all term contracts and binding on all parties, whether it's upstream or whether it's us or whether it's a downstream customer.
The next question is from the line of Probal Sen from Centrum Broking.
Sir, first question was with respect to the Petrochemical segment performance. You did mention about optimizing the sort of OpEx and costs for the segment. I just wanted to understand. Has there been any change in terms of the gas mix for the segment this quarter? Have we managed to get some lower-priced LNG in this segment? Or has there been mostly been fixed overheads which are now delivering operating leverage because of the higher throughput?
Both are there, both are there, even with the production ramp-up, more than 100% capacity production, that's number one. Number two, we are mixing the portfolio, getting the portfolio, which is the cheapest gas for petrochemical, dependent upon the situation. So that -- both has resulted that. The price, as you know, as I have already explained to you, that the price was relatively very -- it was stressed.
And sir, is it -- have you seen any improvement at all in the Petchem prices in the fourth quarter? I mean in the first 2 months so far, what you have seen? Has there been...
Yes, there is a marginal improvement, not to the extent of the fall have we seen in quarter...
No, of course not. Of course not. I was talking Q-o-Q, sir, based on the Q3 numbers. On that number, has there been any improvement?
Yes, but I think we recovered by about 20%, 25%.
Okay. That is good to know. And sir, last question was with respect to the natural gas trading business, where, on a Q-o-Q basis, of course, our numbers have shown a sharp recovery. But what we've seen in Q4 is Asia LNG prices have dropped even further. So is it -- does it impact the U.S. LNG portion at all? Or are we -- the U.S. is well positioned even at these low levels to continue to sort of show a stable performance from these levels? Or will it take -- remain as volatile as it has been in the last 3 quarters? Any guidance, any color you can throw on this, sir?
Yes, yes. Our contracts in last 1 month when we are seeing this coronavirus, because of which, the prices are going down, we have been performing the contracts in the upstream side, which is the seller selling to us. And we have seen the similar existing, happening in the downstream side also; buyers are also buying from us. In India, we don't see any performance issues, and hence, the prices are usual. Whatever the cargoes which are now being discharged, their prices are decided quite a few months ago. So there is no change in our existing operation as of now.
But is it then fair to extrapolate and say, as and when these prices start to become the base, let's say, maybe 2 or 3 months down the line, if such softness persists, then there could be some challenges for placing U.S. cargoes?
We can't...
A going concern, we think that these prices are really temporary because -- this is mainly because of so many ships, LNG ships going to China and then they are not able to get the charge there. They have to be sold elsewhere. We think things will normalize in the next 30 days.
The next question is from the line of Maulik Patel from Equirus Securities.
Can you give an update on the Kochi-Mangaluru pipeline?
As I've already told, the Kochi-Mangaluru pipeline is under advanced stages of commissioning. Only a few new sections of 200 meter of around 50 meters or some other places are stuck up. That is being completed. And by March end, we are expecting to be fully commissioned.
Okay. And some bookkeeping numbers. What has been the CapEx so far in this particular quarter?
Up to our 2 quarter is...
Sorry, sir. Can you just repeat it?
Up to December Q3, around INR 4,000 crores CapEx.
Okay. INR 4,000 crore CapEx. And sir, what's the CapEx for the full year, which we are [indiscernible]?
It's around INR 6,500 crores to INR 7,000 crores.
The next question is from the line of Avadhoot Sabnis from CGS-CIMB.
Yes. So this is in relation to dividends. You have -- it's great news that you've declared a high interim dividend of INR 6.4 versus I think just INR 4 for last year. Does it represent a major change in your payout strategy? Because in the last few years, you've been sticking to virtually the minimum payout ratio compared to higher payout ratios in overall companies. So can we see -- how should we look at this? Is this a one-off thing to be given? Or is it something in terms of a change in strategy in terms of how much you want to pay out on a consistent basis going forward?
See, as we have told that -- as per our government DIPAM guidelines, we have to pay 30% of PAT and 5% of net worth; that you know this is the DIPAM guidelines which is applicable. This time, we have been asked to pay more by the government, so you are getting more.
Sir, I get that, sir, but I presume you have been asked -- you have been asked to pay more virtually every year in the past as well, right? So what I'm trying to also understand is, does paying more -- would it -- can we take -- I mean, presumably, every year, the government will ask you to pay more. Can we look at the higher payout as being largely now consistent policy?
It will not be consistent. This is a one-off, I think.
Okay. And secondly, just putting aside -- does maintaining your CapEx guidance despite CapEx being relatively lower in the first 9 months. So is that consistent? Is that how you're looking at this big jump in the fourth quarter, is it?
Yes, yes. Because most of the -- we will maintain. We have already spent INR 4,000 crores up to Q3. And then the balance of the year, around INR 2,000 crores, INR 2,500 crores will be completed in these 3 months.
The next question is from the line of Vijayant Gupta from Edelweiss.
My first question is on Transmissions. So if you could share some volume estimate for the Urja Ganga pipeline for FY '21 and '22. And what would be the tariff for this pipeline?
See, for Urja Ganga pipeline up to Dobhi, the tariff has already been announced around INR 60, INR 63 per MMBtu. And the commissioning up to Matix is under advanced still. So volume flow for -- up to March, I can't predict that way. But '21, '22, it would be around 8 to 9 MMSCMD. Going forward, other pipeline [indiscernible]. So it will be 4 to 5 or 6 MMSCMD. Slowly, it will ramp up, depending upon the commissioning of various fertilizer plants.
And this tariff has been determined by PNGRB? Or is this bilateral?
PNGRB. PNGRB, yes.
And this would be applicable for the entire phase?
No, no. For Phase 2 and Phase 3, they will further calculate and then give us. This is up to Phase 1.
To Patna.
Up to Patna or Dobhi, you can say.
Okay. And second question on trading. So we have seen a rebound in trading margins. So what happened to those cargoes which were supposed to be sold at oil-linked prices to the fertilizer units? I mean, are they being sold at spot prices? And because of higher spot, we have seen the rebound in margins? And -- or I mean, or has the supply to those fertilizer units resumed?
It is back-to-back contract. There is no such -- spot has no impact on that.
[indiscernible] because of higher margin in the Q3 winter...
Okay. You can explain, yes please.
So this is -- these are winter months, so some of the outside India FOB sales from our U.S. projects, they have fetched slightly higher margin. And because of that, mainly because of that, and also we have been able to get some better margin in the in-country sales within India. That has led to this higher margin.
Okay. And is there any update on those 5 fertilizer units? You had mentioned last quarter that the cargoes bound for those units were sold in the spot market. When can we see those units resuming operations?
So this -- such transaction is not there in this quarter, is there?
No. So next year, next...
Next year, they will come up.
Gorakhpur and Sindri will come up next year, and Barauni thereafter. And Matix will come at the end of this quarter -- in Q1 of 2021. And Ramagundam is about to also get commissioned now shortly within the next 1, 1.5 months, it should get fully commissioned. These are the 5 lines.
The next question is from the line of Amit Shah from BNP Paribas.
I just have 1 question. In the past, you guys have mentioned that you actually hedge 9 to 12 months forward. So I'm guessing, taking advantage of the higher crude prices in the third quarter, would you have the visibility to say that the next 2 to 3 quarters from a gas trading perspective should look as good as how the third quarter looked? Or there is no way to say something like that?
It will be around third quarter, but saving and all the mitigation measures as well as another ramping up of the consumption in the -- here in India is there. So that way, it will be around the country as you have seen in the Q3.
Because by my logic, Indian demand should probably pick up, right, considering because of China, the prices have collapsed in this spot LNG market?
No, no. I don't think -- that may be one of the factors. A factor will be our pipeline is getting commissioned more and more fertilizer and CVDs are coming up. So that will create that impact, that demand. China may be temporary, may not have much effect on that.
So is it fair to say that -- does spot LNG prices internationally, at all, matter to you? Like right now, it's $3. It can be $6. Does it change anything for you?
No, the matter...
No, it doesn't -- a little bit.
Maybe a little.
On some of the transactions, where it's required. Otherwise, it has no impact because we have downstream customers tied up in the terms contract or some fixed contract of whatever is there.
Because in the past, you had highlighted that oil prices around $55 are not the most ideal for the gas trading business. So then how does that kind of tie up? Because effectively, it all ties into the LNG price, right?
You are mixing 2 things. One is your crude prices; and second, whatever the demand projection is there. The prices on the back-to-back, which are there, has no impact on our profitability, right?
Well, the business as a whole, not specific contracts.
But if there is a difference between the asset prices and these Brent prices, then, wherever required, we are also hedging. So it is the different transactions together to have all the scenarios which has -- which are accounted in the books. We can't specify one point and then say that these are the only scenarios where we take mitigation measures.
Okay. So then probably to simplify, and I'm sure this is my last question. In the -- is it fair to say that the gas trading market, or the gas trading business, was actually -- saw some profit erosion in the second quarter, we will not see a quarter like this at least for the next 2 or 3 quarters? Is that fair?
That I can't say because nobody can predict the prices. Have to be Brent prices, [ Henry ] prices, where it goes. But we are -- as we have already told you, that various synergies, various mitigation measures, as many times we have told you, things come up to [indiscernible] stage. And we have shown the results. I think that is fair enough to judge.
The next question is from the line of Amit Rustagi from UBS.
Sir, my first question pertains to, what is the demand you are likely to see on Kochi-Mangaluru pipeline? The one that is commissioned? And will it lead to higher volumes at Kochi? Or do you think that already we have Gorgon supplies and they are sufficient to meet the demand in Mangalore?
In the present?
Yes, please. Yes, --
So The present utilization of this pipeline is around 4 million cubic meters per day, and we expect other 4 million to come up once the full pipeline is ready up to Mangalore.
Sir, are you saying 4 mmcm per day, like equivalent to 1 million tonne of LNG?
Yes, 1 million tonne of LNG is being sold off that terminal now.
And you're saying, after Mangalore gets connected, another 1 million tonne will get added?
Yes, that's right.
Okay. And Sir since we have a good mix of long-term and spot contracts, so do you see that your -- when we -- when the regulator open -- brings open access for the [ significant ] situation, we can look at some of the large industrial areas like Morbi or other geographical areas in Gujarat, which have a very high demand? And if there is any open access, what is our strategy to add the new customers on the industrial site?
Mr. Amit, where is the floor access?
No, no. He's talking about CVDs.
What? CVDs? Okay.
So Amit, the CVD open access may come in future. But we are already looking at, though -- Anjani Tiwari, told you we are already looking at those customers, whether in Morbi or elsewhere. And we are trying to see how we can book capacity and get through to the customers because in between, there are these players who may not be giving capacity that easily.
If I can get [indiscernible] to explain, or...
There are other operators who have to be dealt with.
This may take time also.
Okay. Sir, then what could be the model to bring [indiscernible] here. Like, can we set like modern-scale LNG set up to supply gas in those areas?
So all those things are going on already. We are working at many places on short-term LNG model where they install the tank and we give them LNG by road. All those things are going on already.
Sir, which geographies are -- they are more likely? Like, which geographies you're trying it or testing these models?
Any geography where the pipeline is not available for, say, 100 kilometers or 150 kilometers. The customer is being encouraged to set up an LNG regasification system, in-situ system, wherein they install a tank and a regasifier and the internal piping. And we give them LNG through tanker. One tanker contains about 15 to 18 tonnes of LNG, which may be sufficient for a small customer for many weeks maybe. That's the model in summary.
Okay. But do you think that model can work for Morbi as well? Because Morbi is not -- maybe not 150 kilometers and you don't have any LNG terminals.
No, Morbi --
When the opportunity is there, we'll do that.
Wherever the opportunity is there, we will do that. These models are available. End of the day at the [indiscernible] the gas has to be competitive. If it becomes competitive using the LNG model, people will buy it, and we are looking at those models.
That's right.
The next question is from the line of Vidyadhar Ginde from ICICI Securities.
The first question is on the gas marketing business. So if you can give us an idea as to what proportion of your volumes for FY '21, they are tied up, you're contracted in LNG volumes? And have any volume at all, been -- any cargo at all been tied up at a loss?
So you are asking about the U.S. LNG?
Yes, if -- even if there's some other contracted LNG which is not tied up, not just U.S., but mainly U.S., I guess. Is -- how much of your contracted -- long-term contracted LNG volume for FY '21? What proportion, if you could give us some idea, 10% not tied up, 15% or 5% or whatever?
I will give you the exact figure. Up to Q3, last quarter, with Q3 -- this '20, 66 cargoes -- out of 66 cargoes, 30, 34 cargoes have been sold in the international market. Rest has come here. So that way, we have done -- we are about...
Sir, I'm asking about next year. FY '21 for next year, how much of your cargoes you have tied up? I'm not asking for past. I said, for FY '21, because you had said on the last earnings call that we have tied up most of the volumes until March '20 and some of the volumes until December '20. So I'm trying to get some idea on what proportion of your remaining 9 months of -- that is April to December or best is if you can give April '20 to March '21. What proportion of your long-term volumes you have tied up with customers?
So for the year '21, '22, the total for...
'21, FY '21, yes.
FY 2021. GAIL is about 14 million tonnes, 1-4, 14. Out of that, about 8 cargoes as of now are unallocated. 8, only 8 cargoes there. And those cargo, we keep getting demand here from our domestic marketing group. So they will come here only as of -- just now -- just to ship for that, okay? This is the...
And my -- there was a second part of the question, that out of these, are any cargoes which are now tied up? So 8 are unallocated, balance are allocated. So the ones allocated, are any of those cargoes booked at a loss? Or everything is either no profit, no loss or profit?
That way we can't give that figure because that loss is a [indiscernible] it is a follower depending upon the -- these things, too. So that would -- that calculation we can't give you on that yet. We can only give the quarter-to-quarter, whatever is there [indiscernible] And you can -- what we want to say that most of the cargoes have been tied up and some of the cargoes, which are there, will be tied up, depending upon the demand scenario and other...
And we have very small only, the remaining here, I think. So that's 6 months. Now the second question was on Brahmaputra Cracker. So it's not very clear what you said about this. So you said that about INR 4,600 crores of feedstock subsidiary has been provided, and you got INR 930 crores in the December quarter. So this INR 930 crores relates to which period? It relates to the current year? Or it relates to more than 1-year period?
Now let me further clarify to you. Brahmaputra Cracker and Polymers Limited is a subsidiary of GAIL. And BCPL is operating at -- in Assam, right? So in order to maintain the profitability, IRR of 10%, the government has given feedstock subsidy of INR 4,600 crores for 15 years to maintain the IRR of 10%. So while closing the accounts, they have accounted INR 930.49 crores for the period, '15/'16, '16/'17 and '17/'18.
So how much of this is for prior period?
That I can't say because this is their account. They have done it. You can easily calculate all our prior period.
All is prior period.
So all is prior period. So this is all past period. And can you give us the profit of Brahmaputra Cracker for 9 months and Q3?
At present, we can give -- wait for me 2 minutes. Let me find out, and you can ask another question. We'll keep the profitability. Let me find out.
So that was -- so actually -- okay, then in terms of the volumes you have tied up, that includes next year, which you were talking of coming back of marketing.
Give me one minute. This is the profit. For 9 months, the profit is INR 704 crores.
Okay. And Q3?
Q3 is INR 848 crores because which has been absorbed with the losses of Q1 and Q2. So up to Q3 is INR 704 crores.
Okay, okay. So basically, you have received no subsidy for the current year actually? So which will come at some stage, I presume?
There is a process involved in that. There is [indiscernible] even...
So it comes with a lag, is it?
It -- the other has recently come. We'll follow up.
Okay. Last question, what proportion of your contracted long-term LNG is tied up and is expected to be sold to fertilizer plants in FY '21? Some rough idea.
Everything is more or less taken.
This we can't give you.
But the fertilizer plants which you mentioned, which are coming up in next year or earlier, so those are the plants which are going to take the long-term contracted volumes only?
That is confidential information as it [indiscernible] will tell you everything.
The next question is from the line of [ Prarka Ranjan ] from Systematix.
Can you give me an update on the separation of pipeline and marketing, which we keep hearing in the media?
Whatever you are seeing in the media, that we are seeing in the media. So there is no such further -- we have anything further to add.
Okay. The second question was, post the fertilizer plants, all of them starting up, how much of U.S. volumes will still be -- have been placed outside?
Nothing. All of them will come here.
All of them will come here? Okay.
The next question is from the line of [ S. Ramesh ] from Nirmal Bang.
Sir, if you look at your graph, transition volume has gone up by about 3 million liters per day. So how -- can you give us a sense also where this growth has come from? And can we assume the incremental volume of that 4 million to repeat, as already mentioned, for next year to be on the base of 110 million liters per day?
So these are the ramping of consumption, which has increased in the statement, and it will ramp up. So it is going on -- 110 million is the volume up to this quarter, right? 110.35 mmlpd.
Yes. Yes. So there is an increase of [ speed ] last quarter, you had a problem will not take on another lot [indiscernible] the gas. So is part of those -- is part of the increasing volumes due to those customers who have started drawing gas? Or is it from some other customers?
It is mix of that, customer drawing gas as well as the people who need more gas. That is ramp up.
And in terms of the FY '21 and the '22 expectation on the plant, what is your sense in terms of the time line for the success of company's commissioning? Like at Matix you said, is ready to take gas by end of March and Ramagundam by end of March. But how are the other 3 plants? Are their projects progressing well? Or is there risk that there could be some delays in terms of their completions for FY '21 at [ Dhamra-Angul ]
No, the -- all the fertilizer plants as well our pipelines are coming parallelly. So that will come in this year, some of them. And then some of them in next year.
By Next year. Like, 2021, all these...
All these come on, yes.
They are all on track?
Yes, yes.
The next question is from the line of Bhavin Gandhi from B&K Securities.
Firstly, sir, if you can share with us the regulator has floated a public consultation document on reduction of tariff for taxation -- for the tax reduction. So can you quantify what could be the overall tariff reduction that GAIL might have to see?
We have no such year [ incident ] because...
And moreover, whatever will be the tariff reduction will be actually reduction in the tax also. So we should not be bothered.
Sure, sir. And the second part, sir, if you can share with us the split of U.S. LNG volumes in the quarter that was placed in the domestic market and outside India?
Actually, we don't have such figures. We can't split this quarter. Whatever the volume are there had been tied up, and we are selling...
We -- tied up in...
It has been tied up.
The next question is from the line of Mayank Maheshwari from Morgan Stanley.
The first question I had was, in any way, are you taking advantage of the current prices in the last couple of months? You've seen prices of spot LNG. And is there any way GAIL can actually benefit out of it?
We don't have such advantage because we have a long-term tie-ups. And our upstream, downstream both are tied up. So we don't have such advantage. Wherever, it is there, we get very, very, very minimum.
Okay. And sir, the final -- other question was related to the LPG segment. If you look at your net realizations on LPG, they have been largely flat on a sequential basis for the past 2 quarters, despite this quarter, you have seen some improvement in LPG prices. Any specific reason for that?
It will come back. The -- because any price, the price will come up and come down. We'll come up with some statutory to talk about it later on, okay?
The next question is from the line of Pinakin Parekh from JPMorgan.
So 3 questions. First, sir, can you give us a sense of the 14 million tonne GAIL contracts of LNG, how much at this point of time is scheduled or hedged to be sold outside? And how much is -- how much will be brought into India?
Sure. And -- this last few months, about 2 million, 2.5 million tonnes was sold. Last 12 months, 2.5 million tonnes was sold outside. Going forward, we estimate this quantum to go down.
Right. Understood, sir. Secondly, sir, at this point of time, given whatever hedges you would have entered, are any of your U.S. or any external volumes sold to a counterparty in China, which could be at risk because we have buyers declaring force majeures in China?
No. No, we have not sold anything to Chinese counterparties.
My last question is, Sir, we keep on hearing about the gas -- about the gas exchange in India. So can you give us some color as to is there any progress on it? Or is this just a media hype? And if it were to take place, would it impact GAIL in any way in terms of how it sends its volumes into India?
So this gas exchange, what you are listening, we are also listening. How it will come? India has been deciding for that. And what would be the methodology? We can't say which volume will be traded in that way. So as soon as something concrete will come, we'll tell you.
The next question is from the line of Vikash Jain from CLSA.
Sir, this is on gas trading. Now when you say that all your cargoes except 8 are allocated, what exactly do you mean by allocated? I mean what kind of hedges? Are we talking about hedges? Are we talking about -- when we are specifically talking about hedges, is it just hedging in terms of price? Or is it just hedging in terms of destination swaps? What could be the breakup of that? If we could have some sense on that.
So what we can share is what is the share of each of these. What we can tell you there are back-to-back agreements, there are destination swaps, and there is something called a financial hedging being done. So all in all, we are able to tie up all the cargoes and fill them for the entire financial year.
Sir, correct me if I'm wrong, but in case of destination swaps, there, the price risk would still, to some extent, remain on you. But in case of the others, of course, there -- it will be lesser. So that's why...
Only time can tell you what the risk is. If we can all [ access ], that also can be hedged at that point of time.
Okay. And sir, so why I'm asking you is that it's a little bit confusing when you say that you're hedged, but you're saying that we can't really...
So there are 2 types of risk. One is a volume risk, one is a price risk. Volume risk is already covered. And the price risk in terms of time is what may lead to some exposure, which also can be hedged.
Okay. Sir, I mean, let me kind of -- because I understand that you're being rather -- there's only limited what you can share about your hedging policy. In that case, to kind of come down to the more results of those hedging, so your gas trading profit last quarter was rather -- was a big -- depressed, in a manner. This quarter, it has been up from that -- from the last quarter.
That's right.
So as you are seeing the trends so far, nearly 1.5 -- half of the quarter is over, there is no reason for us to believe that the coming quarter, where LNG prices are very different, that's why we are concerned, would be closer to the 2Q number. There is no reason for us to fear that. Is that a reasonable statement to make?
Yes, reasonably, you can estimate that way.
So 3Q is a better guide to -- for the future quarters, rather than Q-to-Q?
We can't give you a specific numbers at this stage because there are so many other factors.
Vikash, your question -- before that, it is going to be as bad as Q2 or as good as Q3? What is your question?
My question is, which one is a better guide of future quarters? I understand that there is a move, which can happen in terms of certain quarters, one-off things happen like you were explaining last quarter.
The answer is that Q3 is a better guide.
We'll take the next question from the line Raj Gandhi from SBI Mutual Fund.
So this -- I know you shared the GAIL gas numbers. However, from what we understand, your City Gas investments are spread across a lot of entities and even stand-alone has a few of City Gas investments. So will it be possible for you to kind of consolidate and give us some number on the City Gas? Because this is just one entity.
On the GAIL Gas, which is 100% subsidiary of GAIL. That is there that we can give you. And we get -- that number we have given -- already we have given the number of GAIL Gas.
Right, right. There is no particular entity, your City Gas investment, from what I understand is spread across. So there is no as such, legal entity. But can you just aggregate the numbers across several entities what you have and just give one number for City Gas?
These are available in the consolidated base because so many JVs are there City Gas, like Mahanagar or IGL, and then your Green Gas and so many other entities are there. Their consolidated numbers will be available in the consolidated statement. So if you want to have any specific number for any cities, that we can provide you separately. There is no problem.
So let's say GAIL Gas is there, IGL NGL is available. Outside that, in your standard various subsidiaries, in your stand-alone, how much investment would have gone into City Gas by now? Any number that you can share?
That number I can't give you at present because every city has a different investment number. Just 1 minute. Just give me 1 minute.Roughly, it is around the INR 3,000 crores, you can say, the total investment. But these are the rough numbers I'm giving you, right? There may be our share or something like that. We are [indiscernible] Right.
Thank you, sir. Ladies and gentlemen, due to time constraints that was the last question. I now hand the conference over to Mr. Deep Shah for closing comments.
Thank you, [indiscernible]. On behalf of AMBIT Capital, I wish you all the very best, and thanks to everyone for joining the call. I now hand over the call to the management for their closing comments.
Thank you very much. Thank you. I think it was a nice discussion with the investors, and management has tried to give all the information, including the demand, which was there from the investors many times related to the environment safety, related to the risk mitigation and related to the other -- GAIL Gas and others. So management has tried to give all the information in detail.And I think with this, thank you very much to all of you, and good evening again. Thanks a lot.
Thank you. On behalf of AMBIT Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.