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Ministry clarifies on marketing margin on gas

September 14, 2009 18:22 IST

Petrol pumpThe petroleum ministry has informed the power ministry that no marketing margin was approved for sale of gas by companies like Reliance Industries, saying these are commercial arrangements between sellers and buyers.

The oil ministry made this position clear in response to a clarification sought by the power ministry on marketing margin charged by RIL for sale of gas from its K-G basin fields on top of the price of $4.20 per mmBtu.

"It is informed that the government has not, till date, fixed or approved the quantum of marketing margin for sale of natural gas by any contractor," it wrote on August 11.

RIL is charging a marketing margin of $0.135 per million British thermal unit on the gas from KG-D6 fields.

On July 27, power ministry had written to the oil ministry saying 'the marketing margin being charged by RIL is not in line with the decisions of an empowered group of ministers on pricing formula (for KG-D6 gas)'.

While Anil Ambani Group firm RNRL on Sunday alleged that RIL was charging 'unauthorised' marketing margin, 35 firms buying KG-D6 gas are paying the $0.135 per mmBtu to RIL without protest.

Power ministry had sought a clarification from the oil ministry when RIL sent a draft GSPA to NTPC for supply of 2.67 mmscmd of gas to the state-run power utility's Anta, Dadri and Faridabad power plants as allocated EGoM. NTPC is likely to sign the GSPA with RIL for the gas by month end.

The marketing margin is lower than $0.17 per mmBtu margin charged by state-run GAIL India Ltd from January 1, 2009 on non-APM or regulated gas, with an annual escalation of five per cent.

The oil ministry said levy of marketing margin was a purely commercial issue between the gas seller and the buyer.

"The issue may be discussed with the seller as part of the settlement of the terms and conditions of the Gas Sales and Purchase Agreement," it wrote on August 11.

"The draft GSPA forwarded by RIL interalia has price element of marketing margin at the rate of $0.135 per mmBtu," the power ministry had written to the oil ministry.

RIL had initially proposed levy of $0.15 per mmBtu but letter agreed to lower it after talks with the fertilizer ministry).

Urea manufacturing plants, which had been given the top-most priority in receiving gas from RIL's KG-D6 fields, were the first to sign GSPAs with provision of $0.135 per mmBtu marketing margin.

The lower marketing margin was agreed in talks between RIL and fertiliser ministry and all the 12 urea making plants are paying the levy without any protest.

A petroleum ministry official on Sunday stated that buyers, who were aggrieved by the levy of marketing margin, were free to approach the appropriate forum.

When contacted NTPC sources said, "The company would protest the marketing margin demanded by RIL but yes . . . it would not be a deterrent in the agreement."

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