Government may allow GAIL to charge marketing margin
Monday, 05 Oct 2009
In a significant development, the government may allow state gas utility GAIL India to charge marketing margin on sale of APM or subsidized natural gas.
The government currently regulates the price at which the gas produced from fields given to Oil and Natural Gas Corp and Oil India Ltd is sold. GAIL has been nominated as the government agency for selling the fuel called Administered Pricing Mechanism APM gas, from such fields.
GAIL is not allowed to levy any charge for the marketing effort on selling this gas but in a draft Cabinet note on revision of APM gas price, the Petroleum Ministry has proposed to allow the company to charge USD 0.11 per million British thermal unit as marketing margin, official sources said.
The note states GAIL should be paid marketing margin to compensate it for the large risk like non payment of bills, billing cost, inventory management and marketing effort.
At present, GAIL charges USD 0.18 per million British thermal units as marketing margin on sale of regassified LNG and USD 0.12 per million British thermal units for sale of gas produced from BG-operated Panna Mukta and Tapti fields. It charges USD 0.11 per million British thermal units for selling gas from Ravva field operated by Cairn India.
The move comes amidst protests over Reliance Industries charging USD 0.135 per million British thermal units marketing margin on gas from its KG-D6 fields. While NTPC has sought specific confirmation of the levy, Anil Ambani Group firm Reliance Infrastructure stopped paying the charge this month.
In the draft Cabinet note, the source said that APM gas price is proposed to be raised to INR 7,500 per thousand cubic meters or USD 4.2 per million British thermal units by 2012-13 in three equal installments from INR 3,200 per thousand cubic meters currently.
RIL's KG-D6 gas is priced at USD 4.2 per million British thermal units.
They said that the note proposes to allow GAIL charge INR 200 per thousand cubic meters (USD 11.2 cents per million British thermal units) marketing margin.
The note further said that "There is a need for marketing margin to be charged on APM gas, which may cover the costs and risks associated with the marketing activities.”
GAIL had last year demanded levy or service charge on APM gas, but the Petroleum Ministry had shot it down saying it move result in an increase in price of gas.
The ministry had written to GAIL in April 2009 that "Any levy of service charge or marketing margin on APM gas supplied by GAIL would increase the price of APM gas above the price determined by the Cabinet. Hence it has been decided that service charge or marketing margin should be levied by GAIL on APM gas only when such a decision in this regard is taken by the Government."
