The ministry has asked state-owned gas utility GAIL India Ltd to charge a rate equivalent to price of imported liquefied natural gas (LNG) for regulated domestic gas, called APM gas, used by fertiliser plants for manufacturing non-urea products.
CAG had in a 2012 audit report stated that GAIL had failed to evolve a suitable system to ascertain the quantity of natural gas utilised by fertiliser companies for manufacturing non-fertiliser products and its billing at market price instead of subsidised price.
“GAIL will charge market determined price for the quantity of APM gas used by fertilizer units for manufacturing of products other than fertilizer during July 2006 till implementation of Nutrient Based Subsidy (NBS) Scheme (ie March 31, 2010),” it said in the order.
Further, the company would “charge market determined price for the quantity of APM gas used by fertilizer units for manufacturing of products other than urea after implementation of NBS ie from April 1, 2010 to October 31, 2014.”
From November 1, 2014 when the new domestic gas pricing guidelines came into effect, “GAIL shall charge the highest rate of regassified-LNG used for production of urea during the concerned period for the quantity of APM gas used by ferilizer units for manufacturing of products other than urea,” the order said. The ministry asked GAIL to transfer the difference between domestic gas price and highest rate of R-LNG used charged for domestic gas used for non-urea purpose to Pool Fund Account (PFA).
This “amount will be adjusted in further uniform pooled price,” the order said. According to CAG, the gas used for non-fertiliser products was to be charged at market price from January 1, 2009. “This led to non-implementation of Ministry’s directives and consequent substantial under recovery in Gas Pool Account besides extra avoidable burden on Government subsidy towards fertiliser production,” the auditor had said in its report.
CAG said non-implementation of directives to realise market price for gas used for manufacturing non-fertiliser products resulted in loss of Rs 40.48 crore in respect of supplies made to Trombay unit of Rashtriya Fertilizer and Chemicals Ltd (RCF) between January 2009 and October 2009.
“Considering all the units of RCF, other fertiliser companies and the period prior to January 2009, there was considerable revenue foregone by GAIL as well as excess payment of fertiliser subsidy by the government,” it had said.