New Delhi: Reliance Group company IPCL has approached Petroleum Ministry against the supply termination notice served by gas transportation firm GAIL India Ltd saying the state-owned company was not entitled to charge marketing margin on the Government-controlled gas it sold to industries.
On February 9 Gail has served a disconnection notice to IPCL for not paying marketing margins on gas supplied.
IPCL has time till early March to sign the revised gas agreement with Gail and has written to the Petroleum Ministry asking it to intervene, and there are reports that Gail might find it difficult to carry out its threat.
Gail has sent a gas supply disconnection notice to Reliance-owned IPCL. Gail says that IPCL has not signed the revised Gas Sales Agreement with Gail after the Government's pricing order, which came into effect from July 2005.
Inspite of the continuous efforts by Gail during the last several months, Gail says, IPCL has not come forward to sign the agreement on the same terms and conditions as agreed by other customers.
Gail is demanding the inclusion of marketing costs at Rs 222 per 1000 scm of gas.
IPCL has protested this and in a letter written to the petroleum Ministry as well as Gail, IPCL says that there is no provision for payment of marketing charge over and above the market determined price subject to the present ceiling of $3.86/MMBTU and that pricing of natural gas under the APM as noted by the Ministry of Petroleum and Natural Gas's letter dated June 20, 2005 is currently valid upto March 31, 2006.
IPCL also says that it had asked Gail for a mandate from the Government to include marketing charges for supply of natural gas, which Gail was not able to furnish. IPCL has also asked the Ministry to intervene to a any unilateral action by Gail.
Gail supplies 1.03 mmscmd of gas per day to all four units of IPCL. The company says that IPCL has sought time till early March after which Gail would disconnect gas supply to IPCL.
In an internal note the oil ministry has said that the gas pricing order does not provide for any marketing margin over and and above the transportation tariff being realised by Gail.
The Tariff Commission has concluded that the transportation rates being charged by Gail are much higher than the reasonable rates to provide Gail a post tax return of 12 per cent on its investments.
The Ministry has also noted that APM gas is allocated to the consumers by the government and that Gail has been performing the function of a transporter.
The activities of transportation and marketing are not separate as such, and that Gail is performing these functions as a bundled activity.
But it still remains to be seen whether the Petroleum Ministry will prevail upon Gail to stop it from disconnecting gas supply to IPCL.
(With PTI inputs)
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