Cabinet nod to fix marketing margin for gas to urea, LPG plants

The union cabinet on Wednesday approved fixing of the marketing margin for supply of domestic gas to urea and LPG (cooking gas) producers.

The marketing margin is the charge levied by gas companies on its consumers over and above the cost or basic price of gas, for taking the additional risk and cost associated with marketing gas.

Currently, different transporters are charging different marketing margins for supply of natural gas.

"With this decision, there would be uniformity in the marketing margin on domestic gas charged by gas marketers for the regulated sectors, namely, urea and LPG," the petroleum ministry said in a release following the cabinet meeting.

"There would be a reduction in marketing margin paid by urea and LPG producers as a result of this decision," it said.

The issue of vast disparity in marketing margins was looked into by the Petroleum and Natural Gas Regulatory Board (PNGRB) and the marketing margin finalized today (Wednesday) is based on the recommendations of PNGRB," it added.

The ministry said future escalations in the marketing margin upto the wholesale price index would be decided by it.

Currently, marketing margins charged by producers and sellers of gas range from 11 cents to 20 cents per million British thermal unit (mBtu).

Petroleum Minister Dharmendra Pradhan had said earlier in the year that the regulator PNGRB has suggested a maximum marketing margin on natural gas sold to fertilizer and LPG plants of about 11.5 cents. The amount is less than what state-run GAIL and Reliance Industries currently charge from gas users.

The ministry had, in November 2013, decided that the government needs to regulate the marketing margin for supply of domestic gas to urea and LPG producers, as the same has implications for the government's subsidy outgo.