Cabinet approves uniform marketing margin for supply of domestic gas to urea, LPG producers

19 Nov 2015 Evaluate

The Union Cabinet chaired by the Prime Minister Narendra Modi has given its approval for a uniform marketing margin for supply of domestic gas to urea and LPG producers. The decision is likely to improve transparency and provide an element of certainty for future investments in gas infrastructure sector. 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 new rate would be ‘fixed on non-discretionary basis” by the Petroleum and Natural Gas Regulatory Board (PNGRB) who recommended a range of Rs 150-200 per thousand cubic meters of gas ($0.115 per million British thermal unit) as a marketing margin for domestic gas being supplied to fertiliser and LPG plants. Further escalations up to the Wholesale Price Index would be decided by the Ministry for Petroleum and Natural Gas.

Marketing margin is a charge levied by gas marketing companies on its consumers over and above the cost or basic price of gas for taking on the additional risk and cost associated with marketing gas. Currently, different transporters are charging different margins for supply of natural gas. Marketing margins charged by producers and sellers of gas range from 11 cents to 20 cents per mmBtu.

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

At present, RIL charges $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 $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 onwards the marketing margin will be charged in rupees per thousand cubic meters with a view to insulate the consumer from currency volatility.

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