EGoM to decide on RIL marketing margin

The Petroleum Ministry has asked aministerial panel to decide if Reliance Industries can charge a marketingmargin over-and-above the government-approved sale price for KG-D6 gas.

The issue of the $0.135 per million British thermal unitmarketing margin charged by RIL "to cover for the risk and cost associatedwith marketing of gas" has been referred to an Empowered Group ofMinisters (EGoM) headed by Finance Minister Pranab Mukherjee, official sourcessaid.

The Oil Ministry, which had long held that the marketingmargin was a bilateral issue between the buyer and seller of gas, referred itto the EGoM after user industries like fertilisers sought a clarification onthe legality of the levy.

In addition, the Central Vigilance Commission had inSeptember asked the ministry to furnish reasons why it was not involved infixing the marketing margin.

The ministry's technical arm, the Directorate General ofHydrocarbons (DGH), too, had opined that RIL should share a part of these earningswith the government. It wanted the marketing margin to be added to the gassales price of $4.20 per mmBtu and profit-sharing between the contractor andthe government to happen at the combined rate of $4.335 per mmBtu.

At present, RIL and the government split profits at the gassales price of $4.20 per mmBtu after deducting the project cost.

Sources said RIL has contested DGH's view, saying themarketing margin was a cost levied beyond the gas delivery flange and as such,was not regulated by the Production Sharing Contract (PSC).

The PSC provides for fixation of the gas price at the'delivery point', the point at which an upstream operator transfers custody ofgas to a marketing and transportation agency. That point for the easternoffshore KG-D6 gas is Kakinada,in Andhra Pradesh, and the government had in 2007 approved a gas price of $4.205per mmBtu at the delivery point.

State-owned gas utility GAIL India also charges up to $0.18per mmBtu as a marketing margin on gas it transports and none of it is sharedwith the government.

The DGH demand also ran contrary to the stance the ministrytook on the issue in Parliament last year.