Regulator cites lack of clarity from firms

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The Petroleum and Natural Gas Regulatory Board (PNGRB) said in an 8 May letter to the oil ministry that the gas marketers have not submitted the complete information on marketing margin and the other elements that go into determining the selling price of natural gas.

The oil ministry had in December asked the board to regulate how much the companies can charge as marketing margin.

“It was decided to seek information from entities in order to ascertain details of marketing margin/other elements included in the selling price of natural gas to consumers during the last three years. While the responses have been forthcoming, in most of the cases the information is sketchy," the regulator said in its letter, which it put up on its website on Wednesday.

It goes on to say that since the government had fixed the marketing margin for certain sources of domestic gas, “any determination of the said margin for all end-customers has to be on prospective basis and PNGRB would require information about the manner in which the marketing margin was determined by the government in the past".

Significantly, the regulator also said that to fix a marketing margin for domestic gas, the government should consider notifying natural gas to enable it “to ascertain the appropriateness and reasonableness of marketing margin".

Various companies, including Reliance Industries Ltd (RIL), Oil and Natural Gas Corp. Ltd (ONGC), GAIL (India) Ltd and Indraprastha Gas Ltd (IGL) charge downstream companies a marketing margin over and above the base price that they charge for supplying the gas.

GAIL charges $0.2 per million British thermal units (mmBtu) as marketing margin for the gas it supplies from the Panna-Mukta-Tapti basin, and RIL charges $0.135 per mmBtu for the gas it drills out of the D6 block in the Krishna-Godavari basin.

An email query sent to RIL remained unanswered.

An IGL spokesperson declined to respond to an email query.

Spokespersons for GAIL and the oil ministry, too, declined to comment.

An ONGC spokesperson could not be immediately reached for comment.

The regulator said it is considering three alternatives to resolve the issue, one of which is to compel the companies to provide information, especially on the actual marketing costs they charge.

“We are not saying that we don’t want to regulate the marketing margin. We have just made some suggestions and sought a clarification," said S. Krishnan, chairman, PNGRB.

The fertilizer ministry has refused to recognize the marketing margin charged by RIL on the grounds that there is no cabinet approval for it.

ONGC and GAIL, however, have the cabinet’s approval to charge marketing margins.

The fertilizer ministry reimburses the companies fully for the cost of gas that is required to produce urea, since gas is a “pass through" commodity.

The Central Vigilance Commission said “RIL has unauthorizedly levied marketing margin", Mint had reported on 13 January.

aman.m@livemint.com