OREANDA-NEWS. September 7, 2011. The oil ministry's regulatory arm for exploration, Directorate General of Hydrocarbons, wants Mukesh Ambani's Reliance Industries Ltd to share with the government a part of the marketing margin the company charges on gas supplied from its Andhra offshore field.

Reliance charges its customers 13 cents per unit to cover "cost and financial risks" of marketing gas from the KG-D6 acreage. DGH is of the view that the margin should be added to the USD 4.2 per unit price of gas set by the government before calculating the Centre's share of profit.

At present, Reliance and the government split profits at the gas sales price of USD 4.2 per unit after deducting the investment made by the operator. If DGH has its way, the move could also hit state-run gas transporter Gail since it also charges a marketing margin. Gail charges up to 18 cents per unit as a marketing margin and none of it is shared with the government.

The DGH view also runs contrary to the ministry's stand taken before Parliament. The then oil minister Murli Deora had on February 24, 2010 told the Rajya Sabha that oil and gas producers need not share with the government the marketing margin they charge from clients. On the margin charged by Reliance, Deora had said it was a matter between the seller and the buyer.

The contract envisages sharing of gas sales revenue between the government and the contractor at the price set at the delivery point. It does not have provisions for sharing of revenues earned by the contractor from marketing margins, Deora had stated.

Several consumers, including the Anil Ambani group, had opposed the marketing margin on the ground that there was no competition in the market and the government decided the buyers and allocated the quantity for each consumer.