Govt fixes maximum marketing margin for natural gas

By: | Updated: November 18, 2015 10:41 PM

The government today fixed a maximum marketing margin that firms like Reliance Industries can charge on selling natural gas to fertiliser and LPG plants at Rs 200, a 12.5 per cent cut from current charge of Rs 225.

Natural gas, gas price, India gas priceThe new rate would be “fixed on non-discretionary basis,” it said, adding the decision is likely to enhance transparency and provide an element of certainty for future investments in gas infrastructure sector. (Reuters)

The government today fixed a maximum marketing margin that firms like Reliance Industries can charge on selling natural gas to fertiliser and LPG plants at Rs 200, a 12.5 per cent cut from current charge of Rs 225.

“The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval for determination of marketing margin for supply of domestic gas to urea and LPG producers,” an official statement said here.

The new rate would be “fixed on non-discretionary basis,” it said, adding the decision is likely to enhance transparency and provide an element of certainty for future investments in gas infrastructure sector.

Currently, Reliance Industries charges USD 0.135 per million British thermal unit (about Rs 225 per thousand cubic meters) as marketing margin on its eastern offshore KG-D6 gas. This is over an above the current gas selling price of USD 4.24 per mmBtu.

While RIL charges marketing margin in US dollars, the same is charged in rupee — Rs 200 per thousand cubic meters — by state-owned Oil and Natural Gas Corp and GAIL India Ltd.

From now on the marketing margin will be charged in rupees per thousand cubic meters with a view to insulate the consumer from currency volatality.

The Oil Ministry had in December 2013 given freedom to gas retailers including Reliance Industries Ltd (RIL) and GAIL (India) Ltd, to fix the marketing margin they want to charge on sale of natural gas to consumers other than urea manufacturing units and LPG plants.

It had decided that government needed to regulate the marketing margin for supply of domestic gas to urea and LPG producers, as the same had implications on government subsidy outgo. Both urea and LPG are subsidised.

Sector regulator Petroleum and Natural Gas Regulatory (PNGRB) was asked to suggest marketing margin for the same.

PNGRB recommended a range of Rs 150-200 per thousand cubic meters of gas (USD 0.115 per million British thermal unit) as a marketing margin for domestic gas being supplied to fertiliser and LPG plants.

“The issue of vast disparity in marketing margins was looked into by the PNGRB and the marketing margin finalised today is based on the recommendations of PNGRB,” the statement said. “Future escalations in the marketing margin upto Wholesale Price Index (WPI) would be decided by the Ministry of Petroleum and Natural Gas itself.”

Presently, marketing margins charged by producers and sellers of gas range from 11 cents to 20 cents per mmBtu.

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