Oil regulator likely to hire consultants to set marketing margins for RIL, GAIL

Oil regulator PNGRB plans to hire consultants to advise it on fixing the margin that natural gas marketers such as Reliance Industries and GAIL India can charge from urea manufacturers and LPG plants.

After grappling with the issue for two years, the Ministry of Petroleum and Natural Gas had on November 21 ordered that the margin to be charged, over and above the gas sale price, should be fixed between the seller and buyers in all sectors other than urea and LPG.

It asked the Petroleum and Natural Gas Regulatory Board (PNGRB) to determine the margin for supply of domestic gas to urea and LPG producers through its independent process. The PNGRB in turn is seeking consultants to help it, official sources said.

The regulator on January 21, two months after the ministry entrusted it with the job, called for bids from consultants "to assist it in the task of determination of marketing margin for supply of domestic gas to urea and LPG producers for recommending this to the government."

Bids were called by April 11 but the PNGRB yesterday extended the deadline to April 21, they said.

The rates determined by the PNGRB would thereafter be notified by the government.

For users other than urea and LPG plants, the oil ministry had ruled that any complaints about the exercise of monopoly power should be addressed to the PNGRB and/or the Competition Commission of India.

Presently, marketing margins charged by producers and sellers of gas range from 11 cents to 20 cents per million British thermal units (mmBtu).

RIL charged 13.5 cents per mmBtu as marketing margin over and above the government-set price of USD 4.205 for KG-D6 gas for the first five years of production ended March 31.

For the financial year that began on April 1, it proposed to move from charging the margin on net calorific value (NCV) basis to gross calorific value (GCV) basis as the new price formulation uses inputs based on GCV.

The change would result in marketing margins rising by 11%, a move opposed by the 16 urea making plants - the only customers of KG-D6 gas presently, sources said.

Fertiliser firms want to pay 12.2 cents if RIL was to change the pricing methodology from NCV to GCV during the time PNGRB takes to decide on the marketing margin, they said.

All domestically produced natural gas will be priced at an average of international hub rates and the cost of importing liquefied natural gas. Implementation of this formula, which will almost double the rate to USD 8.3, has been deferred till general elections are completed.