OilMin refers Reliance marketing margin issue to EGoM
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OilMin refers Reliance marketing margin issue to EGoM

Last Updated: Wednesday, December 28, 2011, 14:51
 
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OilMin refers Reliance marketing margin issue to EGoM
New Delhi: The Petroleum Ministry has asked a ministerial panel to decide if Reliance Industries can charge a marketing margin over-and-above the government-approved sale price for KG-D6 gas.

The issue of the USD 0.135 per million British thermal unit marketing margin charged by RIL "to cover for the risk and cost associated with marketing of gas" has been referred to an Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee, official sources said.

The Oil Ministry, which had long held that the marketing margin was a bilateral issue between the buyer and seller of gas, referred it to the EGoM after user industries like fertilisers sought a clarification on the legality of the levy.

In addition, the Central Vigilance Commission had in September asked the ministry to furnish reasons why it was not involved in fixing the marketing margin.

The ministry's technical arm, the Directorate General of Hydrocarbons (DGH), too, had opined that RIL should share a part of these earnings with the government. It wanted the marketing margin to be added to the gas sales price of USD 4.20 per mmBtu and profit-sharing between the contractor and the government to happen at the combined rate of USD 4.335 per mmBtu.

At present, RIL and the government split profits at the gas sales price of USD 4.20 per mmBtu after deducting the project cost.

Sources said RIL has contested DGH's view, saying the marketing margin was a cost levied beyond the gas delivery flange and as such, was not regulated by the Production Sharing Contract (PSC).

The PSC provides for fixation of the gas price at the 'delivery point', the point at which an upstream operator transfers custody of gas to a marketing and transportation agency. That point for the eastern offshore KG-D6 gas is Kakinada, in Andhra Pradesh, and the government had in 2007 approved a gas price of USD 4.205 per mmBtu at the delivery point.

State-owned gas utility GAIL India also charges up to USD 0.18 per mmBtu as a marketing margin on gas it transports and none of it is shared with the government.

The DGH demand also ran contrary to the stance the ministry took on the issue in Parliament last year.

The then-Oil Minister Murli Deora had on February 24, 2010, told the Rajya Sabha that firms like RIL need not share the marketing margin with the government as it was a bilateral issue between the seller and the buyer.

"The said price (USD 4.2 mmBtu for five years) does not include any charge beyond the PSC delivery point. The marketing margin (levied by RIL) is beyond the delivery point and arises as a result of the gas sale and purchase agreement signed between the seller and the buyer," Deora had said.

PTI




First Published: Wednesday, December 28, 2011, 14:51


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