Reliance defends levy of marketing margin on KG-D6 gas

The marketing margin is to cover for cost of employees involved in marketing and sales, related infrastructure and all legal and operational expenses that occur beyond the delivery point as defined in the PSC, RIL executive director PMS Prasad wrote in his letter to oil secretary GC Chaturvedi

New Delhi: Reliance Industries (RIL) has strongly defended its decision to impose a marketing margin over-and-above the government-approved sale price for KG-D6 gas, saying the levy was to cover for the risk and cost associated with marketing of gas, reports PTI.

Responding to upstream oil and gas production regulator Directorate General of Hydrocarbons (DGH) reopening the issue, RIL executive director PMS Prasad on 24th August wrote to oil secretary GC Chaturvedi saying the $0.135 per million metric British thermal units (mmBtu) marketing margin is a cost levied beyond the gas delivery flange and as such, is not regulated by the Production Sharing Contract (PSC).

The PSC governs fixation of price of gas at the 'delivery point', the point at which an upstream operator transfers custody of gas to a marketing and transportation agency. That point for eastern offshore KG-D6 gas is Kakinada, in Andhra Pradesh, and the government had in 2007 approved a gas price of $4.205 per mmBtu at the delivery point.

But the DGH wants the $0.135 per mmBtu levy added to the gas sale price and profits for RIL and the government to be calculated thereafter. Currently, profits are calculated by deducting capital and the operating cost from the gas sales price only.

Mr Prasad, however, said the PSC does not provide for such a move, as the marketing and transportation cost cannot be recovered from revenues earned from sale of oil or gas.

Section 3.2 (iii) of the PSC states that "costs of marketing or transportation of petroleum beyond the delivery point are not cost-recoverable. Both marketing and transport costs are clearly recognised as being distinct from the sale price at the delivery point and kept outside the PSC for purposes of cost recovery," he wrote.

He said any attempt to include the margin as part of the price of gas approved under the PSC "will have the effect of making all marketing costs as well as ensuing risks and liabilities cost-recoverable under the PSC".

Moreover, such inclusion can be done only after amendment of the present PSC.

The marketing margin is to cover for cost of employees involved in marketing and sales, related infrastructure and all legal and operational expenses that occur beyond the delivery point, as defined in the PSC.

It also covers the credit risk of buyers, litigation costs and penalties such as ship-or-pay reimbursement to transporters and levies for supplying off-spec gas.

"Any costs associated with these risks are at the moment not chargeable to the PSC for the purpose of cost-recovery and are not being claimed as such by" RIL, he added.

He pointed to state-run ONGC and GAIL are charging a marketing margin on government-administered gas, called APM gas, as well as on the produce from the Panna/Mukta and Tapti fields.

User

Consumer Price Index up 1.18% in Aug; food and clothing dearer

Experts also said the movement in the CPI on a month-on-month basis was too small to make any significant statistical suggestions. However, with the passage of the time, the government expects the CPI to supersede the Wholesale Price Index as the benchmark for measurement inflation

New Delhi: Expensive food and clothing pushed up the Consumer Price Index (CPI) in India by 1.18% in August from the previous month, but experts said too much should not be read into the numbers, as the data on retail prices is yet to stabilise, reports PTI.

The CPI based on retail prices stood at 111.7 points in August, compared to 110.4 points in July, as per data released by the government on Monday.

At the all-India level, the CPI for 'food, beverages and tobacco' went up by 1.27% to 111.7 points in August from 110.3 points in the previous month.

The main increase was seen in the prices of vegetables, with the index rising by 4.61% month-on-month to 113.4 points, while the indices for milk and milk products and fruits went up by over 1% each.

Similarly, the index for oils and fats went up by 1.27% to 119.5 points.

Prices in the 'fuel and light' segment rose by 0.69% in August in relation to the previous month, with the index inching up to 116.4 points in August from 115.6 points in July.

In August, the CPI for 'clothing, bedding and footwear' stood at 117.7 points on an all-India basis, as against 116.4 points in July, an increase of 1.12%.

The index for 'housing' was up 0.65% month-on- month at 107.6 points in August, up from 106.9 points in July.

This is the third month that housing prices have been factored into the CPI data. However, the data was compiled only for urban areas.

The government had earlier said that "house rent is negligible for the rural areas" and as such, only urban areas have been taken into account for the index on housing.

The price of miscellaneous items rose by 1.19% in August from July, as per the CPI data, with the index for this segment rising to 110.3 points on a countrywide basis in the month under review from 109 points in the previous month.

Experts, however, said the index cannot be used yet as a measurement of retail inflation.

"We cannot deduce much from the monthly CPI data. It needs time to stabilise," Crisil chief economist DK Joshi said.

He said inflation based on retail prices would only be ready for calculation from next year.

"The government began releasing the nationwide CPI from January this year. It will need at one full year before inflation data could be measured," Mr Joshi said.

The general index for rural and urban consumers stood at 113.1 points and 109.8 points, respectively, in August.

In July, they were recorded at 111.6 points and 108.9 points, respectively, for rural and urban consumers.

Meanwhile, the overall June CPI reading has been maintained at the provisional estimate of 108.8 points.

Experts also said the movement in the CPI on a month-on-month basis was too small to make any significant statistical suggestions.

The new nationwide CPI launched earlier this year was introduced to reflect the actual movement of prices at the micro-level and help policymakers like the RBI in better framing of decisions.

With the passage of the time, the government expects it to supersede the Wholesale Price Index (WPI) as the benchmark for measurement inflation.

Inflation, as measured by the WPI, stood at 9.78% in August.

At the time of unveiling the new CPI earlier this year, the government had said it would continue the practice of giving the figures in the present form without quoting the inflation rate for one year.

These consumer indices include five major groups-food, beverages and tobacco; fuel and light; housing; clothing, bedding and footwear; and miscellaneous items.

User

Satyam case: SC to hear CBI plea for more time for trial

Additional solicitor general Haren Rawal, appearing for the CBI, pleaded that the trial could not be completed within the stipulated time frame because of 18 days of strike by lawyers and 10 days of court vacation

New Delhi: The Supreme Court today decided to hear a Central Bureau of Investigation (CBI) plea for more time to complete its proceedings in the trial in the multi-crore Satyam accounting scam, involving the company's founder B Ramalinga Raju and nine others, reports PTI.

The court also decided to hear the bail pleas of four of the accused.

Tagging the CBI plea with the bail pleas filed last week, a bench headed by justice Dalveer Bhandari issued notices to all the scam accused on the application moved by the prosecuting agency.

While taking on board the CBI's plea for hearing, the bench praised it for the speedy proceedings in the case and asked it not to seek any adjournment.

"There is no doubt that you (CBI) did an admirable job," the bench said.

The agency approached the apex court after its failure to stick to the 31st July deadline fixed by the apex court last November, to complete the trial.

Additional solicitor general Haren Rawal, appearing for the agency, pleaded that the trial could not be completed within the stipulated time frame because of 18 days of strike by lawyers and 10 days of court vacation.

He submitted that deposition by 211 witnesses in the court has already been completed and only 15 investigating officers are now left to be examined by the defence.

The court, after hearing the Mr Rawal's submissions, issued notices to all the accused, seeking their stand on the CBI application for grant of more time.

While cancelling Raju's bail in October, the Supreme Court had stated that the accused could file bail application only after 31st July, if the trial in the case was not completed by then in the local court.

Mr Raju and six other accused, who are currently lodged in Chanchalguda Central Prison in Hyderabad, had earlier moved the Andhra Pradesh High Court for bail as the July deadline for the trial to be completed could not be met.

The high court, however, had refused to grant them bail, prompting four of them to approach the apex court, which, while agreeing to hear their pleas, had issued notice to the CBI on 16th September.

The four who have approached the apex court for bail are Satyam's former internal chief auditor VS Prabhakar Gupta besides its former employees G Ramakrishna, D Venkatpathi Raju and Ch Srisailam.

Besides Mr Raju, the other accused in the case include his brother B Suryanarayana Raju, Satyam's former MD B Rama Raju, ex-CFO Vadlamani Srinivas, former employees G Ramakrishna, D Venkatpathi Raju and Srisailam, former PWC auditors Subramani Gopalakrishnan, T Srinivas and Satyam's former internal chief auditor VS Prabhakar Gupta.

Mr Raju, Satyam Computer founder and its former chairman, had surrendered on November 10 last year before a Hyderabad court adjudicating the nation's biggest corporate fraud, allegedly to the tune of Rs14,000 crore.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)