Govt for uniform marketing margin for natural gas; exemption likely for city gas distribution companies and LNG importers
The oil ministry plans a uniform marketing margin for natural gas produced in the country as it moves decisively in the dispute between key customers and suppliers such as Reliance Industries and Gail India Ltd.
Government sources said that the ministry would make an exception only for liquefied natural gas (LNG), piped supply to households and auto gas. It would be free to negotiate the levy with buyers under watchful eyes of downstream regulator. "This is as per recommendations of the downstream regulator. A decision in this regard is expected to be announced soon," one of the officials with direct knowledge of the development told ET. The oil ministry had sought the Petroleum & Natural Gas Regulatory Board's (PNGRB) opinion on having a uniform marketing margin in the country after buyers, particularly fertiliser companies, alleged that suppliers such as Gail India and Reliance Industries had arbitrarily fixed the levy in the short-supplied market.
"The government regulates prices of gas produced in the country to protect consumers. Therefore, marketing margins must also be regulated," the official said citing the views of the regulator.
The regulator feels city gas distribution (CGD) companies and importers of LNG should have freedom to levy different marketing margins because government does not control consumers prices in these segments, officials said.
"There is a need for exemption because markets for re-gassified LNG and CGD have not evolved yet. But gas marketers won't be allowed to charge the levy in an unscrupulous way. They have to mention it in the invoice and PNGRB will keep an eye on it," the official said.
Currently, marketing margins are negotiated between buyers and sellers. While Reliance charges $0.135 per unit marketing margin for supplying its KG-D6 gas, Gail levies $0.17 per unit for supplying imported gas and gas supplied from the Panna-Mukta and Tapti fields.
Both Gail and Reliance had initially challenged the oil ministry's plan to regulate marketing margins. They had justified the levy as marketing efforts such as supply management, contract negotiations, market tie-up and surveys, dispute resolution, customer facilities, expenses in the form of bad debts, inventory carrying costs and maintaining administrative infrastructure, officials said.