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CAG raps oil ministry for Reliance gains

CAG raps oil ministry for Reliance gains
Highlights

Government auditor CAG on Tuesday criticised the oil ministry for allowing Reliance Industries to charge a marketing margin on its KG-D6 gas in US...

Government auditor CAG on Tuesday criticised the oil ministry for allowing Reliance Industries to charge a marketing margin on its KG-D6 gas in US dollars terms and not in rupees saying it will result in over Rs 201 crore excess subsidy payout on urea.

“Production Sharing Contract (PSC) for KG-D6 block did not provide for marketing margin component. The contractor (RIL), however, has been charging marketing margin based on the energy equivalent of gas supplied i.e. $0.135 per mmBtu,” the Comptroller and Auditor General (CAG) said.

The marketing margin is over and above the government approved natural gas sale price. In a report tabled in Parliament on Tuesday, CAG said the oil ministry had in March 2009 stated that the government had not fixed or approved the quantum of marketing margin till date for sale of natural gas by any company. Thereafter, the ministry in May 2010 fixed marketing margin of Rs 200 per thousand cubic metres (mscm).
“Marketing margin for Gail was fixed in Indian rupee whereas contractor (RIL) was charging this in terms of US dollar,” it said. Charging of marketing margin for KG-D6 gas in US dollar instead of Indian rupee for a commodity produced, marketed and consumed domestically “is incongruous with Indian market,” CAG said, adding that exchange fluctuations meant that the margin which was Rs 244.31 per mscm in 2010-11 increased to Rs 325.51 per mscm in 2013-14.
The ministry of chemical and fertiliser estimates that charging marketing margin of $0.135 per mmBtu for KG-D6 gas would lead to additional subsidy outgo of Rs 125 crore a year.
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