New Delhi: Oil regulator PNGRB will decide on the margin that natural gas sellers like GAIL and Reliance Industries can charge from urea manufacturers and LPG plants by year end, Oil Minister Dharmendra Pradhan said.
After grappling with the issue for two years, the Oil Ministry had on November 21, 2013, ordered that the margin to be charged, over and above the gas sale price, should be fixed between the seller and buyers in all sectors other than urea and LPG. "Ministry of Petroleum and Natural Gas has decided that Government needs to regulate the marketing margin for supply of domestic gas to urea and LPG producers, as the same has implications on Government subsidy outgo. "In all other cases, the marketing margin should be decided by buyer and seller mutually," he said in a written reply to a question in the Lok Sabha.
The Ministry had on November 21, 2013 asked the Petroleum and Natural Gas Regulatory Board (PNGRB) to determine the margin for supply of domestic gas to urea and LPG producers through its independent process. "The PNGRB has intimated that the entire study on determination of marketing margin is expected to be completed by December, 2014," Pradhan said. The rates determined by the PNGRB would thereafter be notified by the government. For users other than urea and LPG plants, the oil ministry had ruled that any complaints about the exercise of monopoly power should be addressed to the PNGRB and/or the Competition Commission of India, he said.
Presently, marketing margins charged by producers and sellers of gas range from 11 cents to 20 cents per million British thermal units (mmBtu). RIL charged 13.5 cents per mmBtu as marketing margin over and above the government-set price of USD 4.205 for KG-D6 gas for the first five years of production ended March 31. For the financial year that began on April 1, it proposed to move from charging the margin on net calorific value (NCV) basis to gross calorific value (GCV) basis as the new price formulation uses inputs based on GCV.
The change would result in marketing margins rising by 11 per cent, a move opposed by the 16 urea making plants - the only customers of KG-D6 gas presently. Fertiliser firms want to pay 12.2 cents if RIL was to change the pricing methodology from NCV to GCV during the time PNGRB takes to decide on the marketing margin. "A representation from the Ministry of Chemicals and Fertilizers was received in the Ministry," he said without giving details of the representation.
