The Dubai-based SPV, TAPI Ltd, will scout for consortium leader who will build and operate the project, arrange for finances and would be responsible for safe delivery of gas through the pipeline that will traverse militancy-infested areas in Afghanistan and Pakistan.
An official statement issued after the Cabinet meeting chaired by Prime Minister Manmohan Singh said, "The Union Cabinet gave its approval for formation of the Special Purpose Vehicle (SPV) for the TAPI pipeline project and to permit GAIL India Ltd to join the SPV (as India representative)."
Oil Minister M Veerappa Moily did not attend the Cabinet meeting as he was in the US.
"TAPI Ltd is required to have an initial contribution of $20 million, that is $5 million from an identified entity from each of the four participating countries," it said. "GAIL, being a Navratna company, is empowered to make an investment of this level for India."
The SPV is being formed for the project as no MNC is willing to participate in the project unless they get a share in Turkmenistan's rich gas fields.
While Turkmenistan, Afghanistan and Pakistan were of the view that the four promoters could build and operate the pipeline on their own, India has insisted that the project be taken up only if a multinational company leads it.
New Delhi does not want to be at the mercy of Afghanistan and Pakistan for its gas needs and also feels that none of the nominee companies of the four countries have the financial and managerial capability to execute the project.
"As a way forward, Turkmenistan suggested the formation of a SPV by the TAPI members. The SPV would take up the feasibility study and design work of the TAPI pipeline to meet the agreed timelines for the project, as well as search for a consortium lead," the statement said.
Pakistan and Afghanistan too have agreed to the formation of TAPI Ltd, it said.
"GAIL has agreed to make an investment upto $5 million in the proposed SPV," the statement said.
Based on an 'in-principle' approval of the Cabinet on May 18, 2006, India joined the Turkmenistan-Afghanistan-Pakistan (TAP) Project in April, 2008 and thereafter, the name of the project stood amended to 'Turkmenistan-Afghanistan-Pakistan-India (TAPl) Gas Pipeline Project'.
The 1,680 km pipeline will carry 90 million cubic metres a day (mmcmd) of gas and is scheduled to become operational in 2018. India and Pakistan will get 38 mmcmd each, while the remaining 14 mcmd will be supplied to Afghanistan.
TAPI will carry gas from Turkmenistan's Galkynysh field, better known by its previous name South Yoiotan Osman that holds gas reserves of 16 trillion cubic feet. From the field, the pipeline will run to Herat and Kandahar province of Afghanistan, before entering Pakistan.
In Pakistan, it will reach Multan via Quetta before ending at Fazilka (Punjab) in India. In all, the pipeline would travel 735-km in Afghanistan and another 800-km in Pakistan.