RIL marketing margin on KG D6 gas not covered under PSC: Deora

According to oil minister Murli Deora, Reliance Industries Limited (RIL) need not club marketing margin with gas sale price for calculation of royalty, a position that runs counter to the suggestion of oil regulator Department of Hydrocarbons (DGH).

DGH had suggested that the $0.135 per million British thermal unit margin, charged by RIL towards marketing cost and risks be added to the sale price of $4.20 per mmBtu for calculation of royalty and profit share to the government.

''The production sharing contract, under which firms like RIL produce oil and gas from areas given by the government, does not envisage sharing of revenue earned by the contractor (RIL) on the marketing margin between the government and the contractor,'' Deora told Rajya Sabha.

The production sharing contract (PSC) incorporates government approved price formula for the sale of gas, from KG basin D6 field at the delivery point (the place where RIL transfers custody for sale to customer). The price fixed for five years was $4.20 per mmBtu.

''The marketing margin is beyond the delivery point and arises as a result of gas sale and purchase agreement signed between the seller and the buyer,'' Deora said in a written reply to a question by member Amar Singh.

''The PSC provides for sharing of revenue between the government and the contractor (RIL) of the sale of gas at the said price at the delivery point,'' he said. He added that the marketing margin was settled between the buyer and the seller and with the government neither deciding nor approving the same.