Cabinet okays marketing margin of Rs 150-200 a unit on natural gas for urea and LPG plants

The Union Cabinet approved on Wednesday a marketing margin of Rs 150-200 a standard cubic meter (scm) to be charged by natural gas retailers such as Reliance Industries and GAIL from urea and for liquefied petroleum gas (LPG) plants.

"There would be a reduction in marketing margin paid by Urea and LPG producers as a result of this decision. Currently, different transporters are charging different marketing margins for supply of natural gas. With this decision, there would be uniformity in the marketing margin charged by gas marketers for the regulated sectors of Urea and LPG," an official statement said.

The statement did not specify what would be the new marketing margin charged by companies but said the marketing margin finalised today is based on the recommendations of Petroleum and Natural Gas Regulatory Board (PNGRB).

The downstream regulator had earlier recommended a range of Rs 150-200 per thousand cubic meters of gas ($0.115 per million British thermal unit) as a marketing margin for fertiliser and LPG plants.

Marketing Margin is the charge levied by gas marketing company on its consumers over and above the cost or basic price of gas - currently $4.24 per million british thermal unit (mmbtu) -- for taking on the additional risk and cost associated with marketing gas.

The Oil Ministry had in December 2013 given freedom to gas retailers to fix the marketing margin they want to charge on sale of natural gas to consumers other than urea manufacturing units and LPG plants as both urea and LPG are subsidised products. The government had asked PNGRB to suggest marketing margin for the same.