The Petroleum Ministry has referred to the Petroleum and Natural Gas Regulatory Board (PNGRB) a proposal to regulate marketing margin being charged by Reliance Industries (RIL) on gas supplied by it from the KG basin.
The move, done ‘with a view to keeping the price to the end consumer reasonable' could put RIL in a fix. The company charges a marketing margin of $0.135 per million metric British thermal unit to cover for the risk and costs associated with marketing of gas.
“In the case of KG-D6 gas, the price is approved by the government while the transportation tariff is regulated by the PNGRB. It is therefore felt that the ‘marketing margin' may also need to be regulated with a view to keeping the price to the end consumer reasonable. The Ministry of Petroleum and Natural gas has decided to refer the determination of marketing margin to the PNGRB, which would take a decision following the due process,'' says a note moved by the Ministry for the Empowered Group of Ministers.
The decision is bound to make RIL jittery as it adds a touch of uncertainty over the future of its petroleum profits from KG D6 and other future gas finds.
The company has maintained that the marketing margin was a cost levied beyond the gas delivery flange and as such was not regulated by the Production Sharing Contract (PSC).
The issue of RIL charging a marketing margin has been strongly opposed by the Department of Fertilizers (DoF) and other agencies. In fact, the Central Vigilance Commission, which is also seized of the matter, had in September asked the Ministry to furnish reasons why it was not involved in fixing the marketing margin.
The Directorate General of Hydrocarbons (DGH) has opined that RIL should share a part of these earnings with the government. It wanted the marketing margin to be added to the gas sales price of $4.20 per mmBtu and profit-sharing between the contractor and the government to happen at the combined rate of $4.335 per mmBtu. At present, RIL and the Government split profits at the gas sales price of $4.20 per mmBtu after deducting the project cost.
The DoF had requested the Petroleum Ministry that entire issue of applicability of marketing margin should be examined thoroughly. Taking a strong position on the issue, the Petroleum Ministry decided to refer the matter, which has been pending for a long time, to the PNGRB for taking a regulatory decision in the ``interest'' of the consumers.
