MC:Gas co stocks down as regulator to fix marketing margins
Moneycontrol Bureau
Shares of gas distribution companies extended Friday's losses and were trading down between 2-5% following news that the petroleum regulator would determine marketing margins for natural gas.
Until now, marketing margins were negotiated between buyers and sellers. Marketing margin is the difference between the purchase and resale prices of a product.
This rule, if comes into existence will be applicable to all marketers like state-owned Gas Authority of India (GAIL), Indraprashta Gas, Petronet LNG who currently do not share any profits with the government.
Meanwhile, GAIL slipped 2% to Rs 370, IGL was also down 5% to 332.20 and Petronet too was down 2% to 154.20 at 10.00 hours
The marketing margin issue surfaced last year in September when the Central Vigilance Commission asked the petroleum ministry to furnish reasons why it was not involved in fixing marketing margins from gas companies, especially Reliance Industries (RIL)
RIL charges $0.135 per million British thermal unit (mmBtu) marketing margin to cover for the risk and cost associated with marketing of gas but industries like fertilisers sought a clarification on the legality of the levy.
The ministry's technical arm, the Directorate General of Hydrocarbons (DGH), too, had opined that RIL should share a part of these earnings with the government. It wanted the marketing margin to be added to the gas sales price of $4.20 per mmBtu and profit-sharing between the contractor and the government to happen at the combined rate of $4.335 per mmBtu.
At present, RIL and the government split profits at the gas sales price of $4.20 per mmBtu after deducting the project cost.
RIL had also stated that GAIL India also charges up to $0.18 per mmBtu as a marketing margin on gas it transports and none of it is shared with the government.
Hence, the ministry has referred the issue to The Petroleum and Natural Gas Regulatory Board (PNGRB) which will decide on how much marketing margin can be charged by any gas marketing entity.
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