R-Infra ready to pay margin fee to RIL, but 'under protest'

After raking up the issue of marketing margin on gas sales from rival Reliance Industries’ KG-D6 field, Anil Ambani-owned Reliance Infrastructure has agreed to pay the charge to RIL, albeit under protest.

The company had been receiving natural gas from RIL but said it would not pay the marketing margins, following which RIL threatened to stop supply to the company’s power plant in Andhra Pradesh. The plant is under maintenance shutdown since September–end and is likely to resume operations in the first week of November.

R-Infra operates a 220 Mw power plant at Samalkot in the East Godavari region. The plant requires 1.1 million metric standard cubic metres a day (mmscmd) of gas. Of these, RIL was supplying 0.52 mmscmd on a fall-back basis in August, though the agreement was for 0.19 mmscmd at a price of $4.2 per million British thermal unit.

In a letter to Union petroleum secretary R S Pandey, R-Infra reiterated that the levy of marketing margin was “unauthorised and nothing, but abuse of its (RIL’s) monopolistic position”. It maintained that RIL did not undertake any marketing to sell the gas and that an earlier empowered group of ministers (EGoM) took no decision in this regard. Simultaneously writing to RIL, R-Infra vice-president Kamal Kant said the payment would be made under protest and without prejudice to R-Infra’s “rights and contentions in this regard”.

Senior ministry officials maintained the issue was one between the customer and the producer of gas and the government had nothing to do with it. RIL charges $0.135 per million British thermal unit (mBtu) as marketing margin on the gas sold by it.

The government, drawn into the fight between the two Reliance groups, had decided to constitute another EGoM to decide on further allocation of gas from the D6 field. The EGoM has yet to be constituted. Officials maintained the purpose of the group was only to make further allocation. It would not go into the issue of pricing, since the earlier EGoM had fixed the price for five years starting from the day of production.