The Comptroller and Auditor General of India (CAG) has pulled up the petroleum ministry for allowing Reliance Industries (RIL) to charge marketing margins in dollars, while it should have been in rupees. The auditor feels the ministry is responsible for not developing a pipeline network in the country leading to the shortage of gas for fertiliser and power plants.
The CAG, in its report ‘supply and infrastructure development for natural gas’ tabled in Parliament on Tuesday, said that the marketing margin on supply of domestic natural gas was approved by the government for state-run GAIL India in rupees, whereas RIL, the contractor for the KG-D6 block, was allowed to charge the margin in US dollar terms.
“The department of finance was not yet reimbursing marketing margin as demanded by the contractor to the fertiliser units….if DoF decides to reimburse marketing margin as charged by the contractor and requested by fertiliser units, additional subsidy burden would be R201.40 crore from May 2009 to March 2014, being the difference between marketing margin demanded by contractor and marketing margin allowed to GAIL,” CAG said in its report.
Charging of marketing margin for KG-D6 gas in dollar instead of Indian rupee for a commodity produced, marketed and consumed domestically “is incongruous with Indian market”, CAG said, adding that the exchange (rate) fluctuations meant that the margin which was R244.31 per mscm in 2010-11 increased to R325.51 in 2013-14.
The ministry of chemical and fertiliser estimates that charging marketing margin of $0.135 per mmBtu for KG-D6 gas would lead to an additional subsidy outgo of R125 crore a year.
“Additional impact of charging of marketing margin by contractor…on 15 million standard cubic meters per day of KG-D6 gas (supplied to fertiliser units on an average) in excess of marketing margin allowed to GAIL, for the period from May 2009 to March 2014 works out to R201.40 crore,” the CAG said.
In addition, the national auditor pointed out that lack of coordination within government monitoring development of pipeline and R-LNG infrastructure projects, which resulted in non-availability of natural gas at affordable price to priority sectors such as fertiliser and power.
Exchange shock
* Says marketing margin for KG-D6 gas in $ for a commodity produced, marketed and consumed domestically is ‘incongruous’
* Adds that the exchange rate fluctuations meant that the margin which was R244.31/mscm in 2010-11 rose to Rs 325.51 in 2013-14
* Charging marketing margin of $0.135 per mmBtu for KG-D6 gas would lead to an additional subsidy outgo of R125 crore a year
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