IPCL disputes GAIL notice

Reliance group company Indian Petrochemical Corporation Ltd (IPCL) has approached the petroleum ministry over the supply termination notice it was served by gas transportation firm GAIL (India) Ltd.

It said the state-owned company was not entitled to charge marketing margin on the government-controlled gas it sold to industries.

GAIL on February 9 served a notice to terminate gas supply to IPCL unless the latter cleared Rs 64.02 lakh outstanding towards marketing margin.

"The government's gas pricing order, which revised the government administered or APM gas price to Rs 3,200 per thousand cubic metres with effect from July 1, 2005, does not provide for any marketing margin over and above the transportation tariff being realised by GAIL," IPCL sources said.

GAIL, however, maintains that the revised government gas pricing order categorised consumers of natural gas into two groups "" one falling under the APM price and the other from whom a market price of $3.86 per million british thermal units is to be charged. IPCL Gandhar, IPCL Baroda and IPCL Nagothane fall in the second category, it says.

IPCL has contended that GAIL had not been able to furnish government orders mandating it to collect marketing margin and had "unfairly" issued the gas supply termination notice.

According to an internal petroleum ministry memo on the issue, GAIL is unjustified in demanding marketing margins on the HBJ pipeline consumers, as the latter are to be exempted from paying these margins as per the original agreement.

The letter points out that the government assured supply of this gas to consumers of the HBJ pipeline, along with an assured return to GAIL.

The 12 per cent post-tax return on GAIL's investment in the HBJ pipeline was to include marketing margins. Any return in excess to the specified 12 per cent should either be passed on to consumers or appropriated by the government.