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Marketing margin to add to controversy

Marketing margin to add to controversy
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First Published: Fri, Sep 25 2009. 11 38 PM IST

Legal tangle: RIL is charging 13.5 cents per mmBtu marketing margin over the $4.2 per mmBtu price fixed by the Indian government.
Legal tangle: RIL is charging 13.5 cents per mmBtu marketing margin over the $4.2 per mmBtu price fixed by the Indian government.
Updated: Fri, Sep 25 2009. 11 38 PM IST
New Delhi: Power utility NTPC Ltd and Reliance Infrastructure Ltd (R-Infra) have objected to the marketing margin charged by Reliance Industries Ltd (RIL) to supply natural gas from its field in the Bay of Bengal.
This could potentially widen and complicate the ongoing spat over the supply of natural gas from RIL’s KG D6 field in the Krishna-Godavari basin.
Legal tangle: RIL is charging 13.5 cents per mmBtu marketing margin over the $4.2 per mmBtu price fixed by the Indian government.
RIL is charging 13.5 cents per million British thermal units (mmBtu) marketing margin over the $4.2 per mmBtu price fixed by the Indian government.
State-owned NTPC and Anil Ambani-controlled R-Infra have signed agreements with RIL to buy 0.61 million standard cu. m a day (mscmd) and 0.56 mscmd, respectively.
R-Infra, which bought the gas for the Samalkot power project in Andhra Pradesh, received a notice dated 22 September from RIL regarding suspension of supplies because it did not pay the marketing margin. In response, R-Infra in a communication dated 24 September said it will not pay the “illegal” marketing margin.
While gas supplies are yet to start for NTPC’s projects, it wants a refund from RIL once the government takes a view on it.
“We have signed the GSPA (gas supply and purchase agreement) to protect our portion of the gas. We have written to...the power ministry to get a clear cut view on the marketing margin,” a top NTPC official said on condition of anonymity. “If the government does not approve of this, we will ask for a refund from RIL.”
“Normally marketing margins are meant for where there is a wholeseller, there is a distributor and there is a retailer. In this case of gas company, there is no wholeseller or retailer. It’s one-man show, one company doing everything,” power secretary H.S. Brahma told reporters on Friday. “So I don’t know how to explain this situation.’’
A Reliance Anil Dhirubhai Ambani Group spokesperson declined comment. An external spokesperson for RIL did not respond to Mint’s query till the time of going to press.
NTPC and Reliance Natural Resources Ltd (RNRL) are fighting lawsuits against RIL over the price of gas.
The litigation between NTPC and RIL in the Bombay high court, dating back to December 2005, relates to the existence and terms of a contract between the two firms. NTPC claims there is a binding contract in which RIL promised to supply 12 mscmd for the expansion of the utility’s Kawas and Gandhar power plants in Gujarat for 17 years at a price of $2.34 per mmBtu. RIL claims otherwise.
NTPC filed an appeal in the Supreme Court on 5 September, challenging an unfavourable Bombay high court order allowing RIL to amend its petition to include an earlier affidavit filed by the Union government in the same court, but in the case between RIL and RNRL.
Anil Ambani’s RNRL is embroiled in a legal battle with RIL, owned by estranged brother Mukesh Ambani, over the pricing of gas. The lawsuit has now escalated to the Supreme Court when RIL challenged a verdict of the Bombay high court on the supply of gas from its field off India’s east coast.
India’s apex court is scheduled to deliberate on the matter on 20 October.
Bhuma Shrivastava in Mumbai contributed to this story.
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First Published: Fri, Sep 25 2009. 11 38 PM IST