The Petroleum Ministry has rejected Reliance Industries' (RIL) contention that charging of marketing margin on gas was an issue between the buyer and the seller and has said that the Petroleum and Natural Gas Regulatory Board (PNGRB) will take a final call on the issue.
In a letter to RIL Executive Director P. M. S. Prasad, on Thursday, Petroleum Ministry Under Secretary Arunoday Goswami states: “the question of the quantum of marketing margin applicable on sale of gas by any marketer has since been considered in the Ministry and a decision has been taken to refer the matter to the PNGRB. Under Sec. 11(j) of the Petroleum and Natural Gas Regulatory Board Act 2006, the board has now been entrusted with the determination of the quantum of marketing margin chargeable on sale of natural gas to end-consumers by a marketing entity, on the basis of the marketing costs incurred by it.”
The Hindu had, on January 6, reported that the matter was likely to be referred to the PNGRB. The stand taken by the Petroleum Ministry is certainly going to create problems for RIL in marketing its present and future gas produce and impact its profit margins. At present, RIL charges $0.135 per mBtu (million British thermal unit) as marketing margin over-and-above $4.2 mBtu. The company has claimed that the marketing margin is required to cover for the risk and cost associated with marketing. It had stated that it was an issue mutually settled between the buyer and the seller and as per the Production Sharing Contract (PSC), for levying any marketing margin, government intervention was not required. The government had maintained that it had referred the issue to the Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee on the insistence of the Department of Fertilisers.
The letter points out that the issue of marketing margin charged by RIL was raised by the Fertiliser Association of India followed by the Department of Fertilisers. Subsequently, on receipt of a reference from the Central Vigilance Commission alleging that RIL had unauthorisedly levied marketing margin, a reference was made by the Department of Fertilisers asking for certain clarifications in this regard.
