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Reliance Industries duping government: Anil Ambani firm

business Updated: Sep 13, 2009 22:31 IST

The Reliance Anil Dhirubhai Ambani Group (R-ADAG) on Sunday accused the Mukesh Ambani-headed Reliance Industries of charging an "illegal and unauthorised" marketing margin on sale of gas from the Krishna-Godvari hydrocarbon basin.

This, it said, would result in an additional burden of Rs 10, 000 crore on the government.

"Reliance Industries Ltd (RIL) is charging an illegal and unauthorised "marketing margin" of 13.5 cents (Rs 6.6) per million btu on the sale of gas from its KG Basin D-6 fields. This accounts for over three per cent of the price at which gas is being sold," said JP Chalasani, chief executive of Reliance Power, an R-ADAG company.

According to Chalasani, RIL does not have an approval from the Petroleum Ministry or the empowered group of ministers (EGoM) to levy this additional charge.

"RIL's marketing margin has, in fact, not been subjected to any process of official scrutiny at all," he said.

"The so-called marketing margin is nothing but a device illegally adopted by RIL to charge a higher sale price, without even paying the lawful share of such revenues to the government," Chalasani said.

"Based on this higher sales price, the government should at least get a higher share of profit petroleum -- in addition to royalty -- as per the production sharing contract.

Shockingly, even this is not happening, and the entire benefit of over Rs 10,000 crore is going to RIL alone." The R-ADAG group has also charged the petroleum ministry with acting in collusion with Reliance Industries.

"The petroleum ministry has categorically denied giving permission to RIL to charge any such marketing margin. It is, therefore, all the more surprising that the petroleum ministry is taking no steps to immediately prevent RIL from charging this illegal levy," said Chalasani.

"This once again strengthens the apprehensions about the biased and partisan approach of petroleum ministry."

Maintaining that RIL's illegal levy of marketing margin is a "double whammy", Chalasanai said: "On one hand, the government is denied its lawful share of the additional sales realisation generated by RIL through this levy, and on the other hand the government also has to eventually pay for this additional burden in the form of enhanced subsidy for the fertiliser and power sectors."

This, he said, was "a shocking case of illegal transfer of over Rs 10,000 crore from government coffers to RIL".

"The major burden will be borne by the government of India in the form of fertiliser subsidies and the governments of Andhra Pradesh, Maharashtra and Gujarat in the form of power subsidies," said Chalasani.

He said Reliance Industries was selling the gas without using any market intermediary to customers identified by the government, which made the term "marketing margin" a "complete contradiction".

"There is no element of marketing involved - there can be no question of the levy of a marketing margin," said Chalasani.

He also drew a parallel between state-owned gas utility GAIL, which was not permitted to charge any such marketing margin.

"GAIL is not permitted to charge any marketing margin on the supply of gas to government's identified customers under the administered price mechanism (APM) whereas the private monopoly gas supplier RIL is blatantly charging the same," said Chalasani.

Reliance Industries is locked in a legal battle with both Reliance Natural Resources, part of the R-ADAG group, and state-owned power utility NTPC over pricing disputes and breach of contract.