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| Govt may allow GAIL to charge marketing margin |
| Press Trust of India / New Delhi Sep 30, 2009, 17:11 IST |
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In a significant development, the government may allow state gas utility GAIL India to charge a marketing margin on sale of APM or subsidised natural gas.
The government currently regulates the price at which the gas produced from fields given to Oil and Natural Gas Corp (ONGC) and Oil India (OIL) is sold. GAIL has been nominated as the government agency for selling the fuel, called APM (Administered Pricing Mechanism) gas, from such fields.
GAIL is not allowed to levy any charge for the marketing effort on selling this gas but in a draft Cabinet note on revision of APM gas price, the Petroleum Ministry has proposed to allow the company to charge $0.11 per million British thermal unit (mBtu) as marketing margin, official sources said.
The note states GAIL should be paid marketing margin to compensate it for the large risk like non-payment of bills, billing cost, inventory management and marketing effort.
At present, GAIL charges $0.18 per mBtu as marketing margin on sale of regassified-LNG and $0.12 per mBtu for sale of gas produced from BG-operated Panna/Mukta and Tapti fields. It charges $0.11 per mBtu for selling gas from Ravva field operated by Cairn India.
The move comes amidst protests over Reliance Industries charging $0.135 per mBtu marketing margin on gas from its KG-D6 fields. While NTPC has sought specific confirmation of the levy, Anil Ambani Group firm Reliance Infrastructure stopped paying the charge this month.
In the draft Cabinet note, the source said, APM gas price is proposed to be raised to Rs 7,500 per thousand cubic metres or $4.2 per mBtu by 2012-13 in three equal installments from Rs 3,200 per thousand cubic meters currently.
RIL's KG-D6 gas is priced at $4.2 per mBtu.
The note proposes to allow GAIL charge Rs 200 per thousand cubic meters ($11.2 cents per mBtu) marketing margin, they said.
"There is a need for marketing margin to be charged on APM gas, which may cover the costs and risks associated with the marketing activities," the note said.
GAIL had last year demanded levy or service charge on APM gas, but the Petroleum Ministry had shot it down saying it move result in an increase in price of gas.
"Any levy of service charge or marketing margin on APM gas supplied by GAIL would increase the price of APM gas above the price determined by the Cabinet," the ministry had written to GAIL in April this year.
"Hence, it has been decided that service charge or marketing margin should be levied by GAIL on APM gas only when such a decision in this regard is taken by the government."
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