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Margin row: RIL cautions on upsetting pact

Mukesh Ambani-led Reliance Industries Ltd has told the government that the margin issue has already been legally settled among all stakeholders, and any attempt to reopen the issue would be "highly arbitrary" and against the provisions of the Production Sharing Contract. Anupama Airy reports.

business Updated: Sep 22, 2011 21:19 IST
Anupama Airy

Mukesh Ambani-led Reliance Industries Ltd (RIL) has told the government that the issue relating to the levy of marketing margins on the sale of its KG-D6 gas, which is a bone of contention with the upstream regulator and also under the scanner of the CVC, has already been legally settled among all stakeholders, and any attempt to reopen the issue would be "highly arbitrary" and against the provisions of the Production Sharing Contract (PSC).


"This issue has been settled in the past and accordingly gas sales and purchase agreements (GSPAs) signed for sale of KG-D6 gas included a marketing margin of $0.135 per unit," RIL said in a recent letter to the petroleum ministry and regulator Directorate General of Hydrocarbons (DGH).

RIL said there is no new ground or any new fact to suggest a different view from what has been followed till now. It also said the DGH was unjustified in seeking this levy to be included as part of the approved gas price for computing cost petroleum and profit petroleum entitlement. DGH had sought this while reviewing the audited account of KG-D6 for 2009-10.

"The DGH view that marketing margin is part of the gas price approved under the PSC is contrary to the response given by the Government of India (Ministry of Petroleum & Natural Gas) in both Houses of Parliament," RIL said in its letter, pointing to replies given by the petroleum ministry in Lok Sabha on December 10, 2009 and in Rajya Sabha on February 23, 2010.

"These responses unambiguously stated the position as per the PSC that marketing margins are charged beyond the delivery point and is finalised between buyers and sellers based on the terms of the GSPA."

The levy of marketing margins by RIL is facing a CVC probe. On every unit of KG-D6 gas sold by Reliance, the company is charging a marketing margin of $ 0.135/unit from its customers in the power stations and fertiliser sector, making the final price for the core sector consumers $4.335 per unit as against the government-approved $4.2 a unit.

So the DGH has refused to clear its accounts.