Power ministry disapproves RIL’s marketing margin on gas

Power ministry disapproves RIL’s marketing margin on gas

New Delhi: The power ministry on Friday said it did not approve of Reliance Industries charging marketing margin on gas it sold saying such levies are paid where distribution chain is involved and not when it’s a “one-man show."

“Normally, marketing margins are (paid) where there is a whole-seller, a distributor (and) a retailer. But in this case of gas company (RIL), there is no whole-seller or retailer. It is a one man show, one company is doing that," power secretary H. S. Brahma told reporters here.

RIL is charging $0.135 per million British thermal unit marketing margin on sale of gas from its eastern offshore KG-D6 fields, a levy which was opposed by state-run NTPC.

Anil Ambani Group firm Reliance Infrastructure, which buys 0.56 mmscmd of KG-D6 gas, paid marketing margin on gas till last month but discontinued it this month saying they were “illegal and unauthorised", prompting RIL to slap a notice of discontinuing supplies.

NTPC this week signed pacts to buy 0.61 million standard cubic meters per day of gas from KG-D6 fields at $4.20 per million British thermal unit price plus $0.135 per mmBtu marketing margin. It has, however, sought specific confirmation on payment of the levy from the government.

RIL says the marketing margin it charges is uniform for all the 40-odd customers and is lower than $0.17 per mmBtu margin charged by state-run GAIL.

NTPC in a letter to the power ministry said it had sought legal opinion on oil ministry’s advice that marketing margin was purely a commercial issue between the seller and the buyer.

The legal opinion stated that “this issue is a commercial issue and NTPC would need to look at it accordingly... NTPC should take up the issue of marketing margin separately through the ministry of power with the appropriate authority in the government."

RIL had initially proposed a levy of $0.15 per mmBtu marketing margin but later agreed to lower it after talks with the fertiliser ministry. Urea manufacturing plants, which had been given top priority in receiving gas from RIL’s KG-D6 fields, were the first to sign GSPAs with provision of $0.135 per mmBtu marketing margin.

The lower marketing margin was agreed in talks between RIL and the fertiliser ministry and all the 12 urea plants are paying the levy without any protest.