NEW DELHI (Reuters) - India's government will partly fund a $2 billion gas pipeline project linking five eastern states to help kick-start economic growth in a region that has trailed the rest of the country, the oil minister said on Wednesday.
The 2,500-km pipeline is to be built by state-run GAIL (India) Ltd, and this will be the first time the government is offering budgetary support as part of Prime Minister Narendra Modi's plan for more balanced development.
Oil Minister Dharmendra Pradhan said the government will meet 40 percent of the cost of the pipeline that will run through the states of Uttar Pradesh, Bihar, Jharkhand, West Bengal and Odisha, which together account for nearly 40 percent of India's 1.3 billion population.
"This will be the first time that government spending will be made for pipeline infrastructure. This will help in achieving the prime minister's vision of the economic development of the eastern states," Pradhan told reporters after a cabinet meeting.
India's economic development has been concentrated in the western and southern states, where there is better infrastructure and more accessible energy supplies. These states get piped gas supplies for household and transportation.
Pradhan said the government was hoping the new pipeline would help attract investment in the agro processing industry in the eastern region. The government has already removed the cap on foreign direct investment in the sector but no unit
The new pipeline will also help in efforts to revive three fertilizer plants, which Modi's campaign had promised to do for the region in his 2014 election run.
India's gas demand is expected to go up by as much as 10 million cubic meters a day once the pipeline is completed in a little more than two years.
Natural gas accounts for about 6.5 percent of India's overall energy needs, far lower than the global average. India plans to raise the share of gas in its energy mix to 15 percent over the next three years.