The Hindu Business Line : GAIL proposal for margin on administered price gas under study

The Ministry of Petroleum and Natural Gas Secretary, Mr R. S. Pandey (sitting), the Director-General, Hydrocarbons, Mr V. K. Sibal (left), and the CII Vice-President, Mr Hari S. Bhartia, at a meet on NELP VIII/CBM-IV ‘Building partnerships for upstream oil gas’, in the Capital on Thursday.

Our Bureau

New Delhi, Oct. 1 The Petroleum Ministry is considering a proposal by GAIL (India) to allow the company levy a marketing margin on gas sold at administered price.

The Petroleum Secretary, Mr R.S. Pandey, said, “GAIL has made a request for being allowed to charge marketing margin on sale of APM gas to cover marketing risks. It is under consideration. No decision has been taken as yet.”

Speaking to newspersons at the sidelines of an interactive meet on NELP VIII/CBM IV organised by the Confederation of India Industry (CII), here on Thursday, he said, “Allowing GAIL to levy marketing margins on APM gas, along with revision in price of APM gas as had been recommended by the Tariff Commission, has to go to Cabinet for approval.”

“Marketing margins are charged on non-APM (administered price mechanism) gas by all companies including GAIL,” he said.

Currently, gas produced from fields given to ONGC and Oil India Ltd on nomination basis is sold at a controlled price or APM price. GAIL sells this gas and is not allowed to levy a charge for the marketing effort.

Marketing margin on non-APM gas is a purely commercial arrangement between the buyer and the seller, and there is no prescription for it, he said adding that “Petroleum Ministry does not control, approve or intervene in such matters.” GAIL’s marketing margin on non-APM gas – gas sold from joint venture fields and R-LNG – varies from 11 cents to 17 cents/mBtu.

Of the total 85 mscmd of gas being marketed by GAIL, it sells 50 mscmd of APM gas.

Inviting the prospective bidders for NELP-VIII/CBM-IV, Mr Pandey, said that the Government will meet all its commitments on tax benefits to the companies that get oil and gas blocks under NELP-VIII and CBM-IV.

Commitment

He said, “The Finance Act promises income-tax exemption for first seven years of production. I can assure you that we will honour the commitment. I cannot assure about tax exemptions under future auctions.”

When asked whether the economic meltdown and the Ambani war is likely to affect the bidding round, the Director-General of Hydrocarbons, Mr V.K. Sibal, said that the response may not be as good as last time and any fight between corporates has a negative impact. “No fight has a positive impact.”

Alongside 70 oil and gas exploration areas, 10 CBM blocks are on offer. Bids close on October 12.

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