GAIL wants marketing margin on RLNG out of regulatory purview

Gas utility GAIL India Ltd has demanded that the government keep the marketing margin the company and other state-owned firms charge on imported liquefied natural gas (LNG) outside the regulatory purview.

Oil Ministry had in December asked oil regulator PNGRB to determine the marketing margin on sale of natural gas on the basis of actual marketing cost so that the price becomes reasonable to the end consumer.

GAIL, however, is not happy with Petroleum and Natural Gas Regulatory Board (PNGRB) being asked to regulate marketing margin on imported LNG and has shot-off a letter to the government seeking an exemption for imported-LNG.

Sources said GAIL has argued that dynamics of sourcing LNG from international market and the risks and costs associated with marketing it to domestic consumers were very different from the sale of domestic natural gas.

While the USD 0.135 per million British thermal unit marketing margin that Reliance Industries charges on the sale of eastern offshore KG-D6 gas has been questioned by users like fertiliser units, GAIL's USD 0.20 per mmBtu marketing margin on regassified-LNG (RLNG) has so far gone unquestioned.

"Keeping in view the long standing shortage of natural gas in the country, and in order to encourage gas imports, the Central Government has taken pro-active steps and as a policy has kept import of LNG under Open General License category and has always permitted the entities to market regassified-LNG (RLNG) at market determined prices.

"Therefore, our impression is that the Government would continue to permit the entities to market RLNG at market determined prices, including its marketing margin, so as to cover corresponding associated costs and risks," GAIL wrote.

The company asked the government to modify its December 26 order so as to exclude the marketing margin chargeable on sale of imported gas, including the Regasified LNG (RLNG).

The Oil Ministry had on December 26 entrusted "the determination of the quantum of marketing margin chargeable on sale of natural gas to end consumers by each marketing entity, on the basis of its actual marketing cost, to PNGRB."

GAIL charges a USD 0.20 per mmBtu marketing margin on gas produced from the BG Group-operated Panna/Mukta and Tapti fields in the Western Offshore.

While RIL's marketing margin is fixed for the five-year period ending March 31, 2014, the margin charged by GAIL on PMT gas and LNG increases by 5 per cent every year.

GAIL also charges a fixed marketing margin of USD 0.11 per mmBtu on selling gas that state-owned Oil and Natural Gas Corp (ONGC) and Oil India (OIL) produce from domestic fields.