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Monday, Oct 26, 2009
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Business Daily from THE HINDU group of publications Monday, Oct 26, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Petroleum Corporate - Outlook
GAIL started recovering Rs 110 per mscm in 2008 Petroleum Ministry directed GAIL to discontinue the charge 
Richa Mishra New Delhi, Oct. 25 The Petroleum Ministry is considering a proposal to allow GAIL (India) Ltd to levy a marketing margin of about 6.16 cents for a mBtu on gas sold at Government controlled price. Marketing margin on sale of natural gas is being charged on all gas sold domestically, except on that sold under the administered pricing mechanism (APM). Official sources told Business Line that there is a thinking that along with a move to increase the APM gas price, a proposal to levy marketing margin be considered. 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 marketing efforts. “A proposal will be moved to the Cabinet after seeking views from the consumers,” a source said. Marketing margin is charged by the gas marketing company to compensate for its efforts as well as risk borne under the gas sale and purchase agreement, which is a commercial document between the marketing company and consumer. The sources said that GAIL has been seeking a marketing margin on APM gas for several years as it has to bear costs for external risks such as delayed payments, disputed payments, legal cases and payments getting stuck in sick companies. GAIL has to pay the gas supplier immediately, though there could be a delay in payment on part of the end-consumer to the gas transportation and marketing company. In fact, GAIL had started recovering a service charge of Rs 110 a mscm or 6.16 cents for mBtu from October 1, 2008, as it was not allowed to charge marketing margin on APM gas. But when the issue was raised by some customers, the Petroleum Ministry on April 20 directed GAIL to discontinue the charge as it was not authorised by the Cabinet. The Ministry, however, recognises the fact that GAIL incurs cost on marketing and needs to be compensated for this, sources said. Initially, there was thinking to allow GAIL to levy a marketing margin equivalent to 11.2 cents a mBtu. But the move did not get positive feedback from consumers. Thus there is a thinking to consider a lower rate, sources added. GAIL’s marketing margin on non-APM gas – gas sold from joint venture fields and R-LNG – varies from 11 cents to 17 cents a mBtu. Of the total 85 mscmd of gas being marketed by GAIL, 50 mscmd is via APM. GAIL proposal for margin on administered price gas under study GAIL invites bids for consultant to study uniform gas price More Stories on : Petroleum | Outlook | GAIL (India) Ltd
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