NEW DELHI: The government has included the natural gas marketing margin charged by Reliance Industries in the fertiliser subsidy for the 2011-12 and 2012-13 financial years to save fertiliser companies from having to pay about $30 million a year from their pocket towards the disputed levy.
Fertiliser companies like Iffco have to pay $0.135 for every unit of gas they buy from Reliance but they faced the risk of not recovering this amount due to a dispute between the government and the energy giant over how much could be charged as gas marketing margin.
The issue of how much a gas marketer could demand as margin based on its costs is now pending before the Petroleum and Natural Gas Regulatory Board (PNGRB) for a final decision. Fertiliser companies, who sell their produce at regulated price, were concerned about the the government not including the gas marketing margin in the subsidy allocation, which could have added to their cash flow problems.
Reliance sells about 15.71 million standard cubic metres a day of gas to fertiliser companies, earning about $986 million a year from them including the marketing margin. RIL produced 436.4 billion cubic feet of gas in the first nine months of last fiscal and earned close to $19 billion at the regulated price of $4.2 per million metric British thermal unit added to the marketing margin.
Government officials said that the R67,199 crore allowed as subsidy for the first three quarters of 2011-12 and the R60,974 allocated for the current fiscal included RIL’s gas marketing margin. “Depending on the PNGRB decision on the quantum of gas marketing margin that can be allowed, the fertiliser subsidy, that is already allocated, would be reworked,” said the official, who asked not to be named. The usual practice is to carry over the subsidy for the last quarter to the next fiscal. The proposed adjustments would be made in this.
The fertiliser department had earlier pointed out that gas marketing margin cannot be decided between the buyer and the seller as gas is a monopoly market.
The oil ministry then referred the matter to the downstream regulator, PNGRB.