Our Bureau

New Delhi, March 10

GAIL (India) Ltd on Friday said that it would discontinue levying of marketing margin on the sale of natural gas covered under the Gas Pricing Order. In a statement issued here the company said, this follows a communication from the Ministry of Petroleum and Natural Gas to ONGC, GAIL and OIL that marketing margin shall not be levied on all category of consumers covered under the Gas Pricing order of June 20, 2005.

Further, GAIL clarified that it has been levying marketing margin only on those customers who are paying market related price in terms of the Gas Pricing Order and not on those customers, to whom gas is sold at the administered pricing mechanism (APM) rate.

Financial impact

The financial implication of less than Rs 40 crore on GAIL due to the discontinuation of the marketing margin on its market related price customers is expected to be substantially mitigated by the income from the sale of sweet crude from its Cambay basin oil field, the commercial sale of which has commenced from September 2005, the statement said. The current level of 350 bbls/day sale from the Cambay fields is expected to go up to 600 bbls/day in the coming fiscal year and further stepped up to 1,400 bbls/day from the year after.

Currently, the marketing of gas in the country is being done by private players such as PMT joint venture and Gujarat Gas as well as the state-owned gas companies like such as GSPCL. We believe that these companies are charging marketing margin of around 10 to 12 cents per MBTU to cover their marketing costs. For GAIL to be competitive in this market, there should be a level playing field.

The Tariff Commission has already addressed the issue of marketing margin on the sale of Regasified LNG (RLNG) in India and is currently examining the issue of domestic gas price.

(This article was published in the Business Line print edition dated March 11, 2006)
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