GAIL doubles marketing margin on gas

Company used to charge Rs 200 per thousand cubic metres as marketing margin from consumers

GAIL India Ltd, the nation's biggest natural gas distributor, has doubled the marketing margin it charges from customers on sale of a small volume of gas sourced from state-owned ONGC.

GAIL used to charge Rs 200 per thousand cubic metres (Rs 5 per million British thermal unit) as effort money or marketing margin from consumers like fertiliser plants and power stations, for selling natural gas sourced from fields that Oil and Natural Gas Corp (ONGC) had got from the government on nomination basis (called APM gas).

However, a distinction has now been made in the gas produced from fields given to ONGC on nomination basis. Any gas that came into production after 2010 is being treated differently than APM gas for which the government decides the price as well as marketing margin.

Gas from the fields of ONGC that came into production after 2010 are being termed as non-APM gas and GAIL has been since November billing higher marketing margin of Rs 10.21 per mmBtu on such fuel sold to consumers, sources said.

Rashtriya Chemicals and Fertilizers Ltd (RCF) and Reliance Industries Ltd (RIL) are among the consumers who have got two bills for November quoting the higher marketing margin.

While RCF refused to pay the higher charges, RIL paid the first bill in protest but when the second bill came it deducted the higher charges it had paid earlier, they said.

Non-APM gas coming from the nomination fields of ONGC is distributed to consumers by GAIL although a small volume is directly sold to consumers by ONGC itself.

While ONGC has not changed the marketing margin on the volumes it trades directly to consumers, GAIL has been since November billing consumers a higher marketing margin.

GAIL, sources said, has reasoned that the higher marketing margin is at par with the rate it charges for its effort on sale of gas from western offshore fields of Panna/Mukta and Tapti.

At the time of revising APM gas price to $4.2 per mmBtu in May 2010 (effective from June 1, 2010), the Oil Ministry had directed that marketing margin of Rs 200 per thousand cubic metres would be charged from customers by the company marketing the gas produced by national oil companies (ONGC and Oil India Ltd).

Subsequently, in June 2010, the Ministry again clarified that marketing margin shall be charged by ONGC and OIL in cases where they are directly selling gas to end customers and in other cases, the marketing margin would be charged by the companies marketing the gas ie GAIL.

The Ministry had last month ordered that allows marketers freedom to fix marketing margin on sale of gas to consumers other than urea manufacturing units and LPG plants. Oil regulator PNGRB will decide marketing margin for urea and LPG plants.