New Delhi: GAIL India and Hindustan Petroleum Corp (HPCL) have signed an agreement to set up a joint venture company for retailing natural gas to households and CNG to automobiles in Rajasthan, on the lines of Bhagyanagar Gas Ltd, the JV in Andhra Pradesh between the two.

GAIL will start its operations in Kota for which it has already prepared a detailed feasibility report. The company''s Vijaipur-Kota pipeline is operational and the Kota city gas project will source its gas though this pipeline.

The proposed JV will undertake city gas distribution projects in the state and provide compressed natural gas (CNG) and piped natural gas (PNG) in cities for automotive and domestic users.

The two companies will hold a 22.5-per cent stake each in the in the new JV company and five per cent will be offered to the Rajasthan government or its nominees. The remianing 50 per cent will be held by strategic investors, public or financial institutions.

According to U D Choubey, chairman, GAIL, city gas distribution will be the next high growth area in gas markets.