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Cabinet to consider natural gas price hike on Friday

Press Trust of India
Jun 20, 2013 at 08:30pm IST

New Delhi: A proposal for across-the-board hike in natural gas prices will go before the Cabinet tomorrow after key ministries of finance and fertiliser have endorsed the plan to raise the rates by 60 per cent.

While the Oil Ministry on Wednesday moved a note for raising gas prices to USD 6.775 per million British thermal unit for consideration of the Cabinet Committee on Economic Affairs (CCEA), the proposal had been listed for consideration of the CCEA meet slated for Friday morning.

It is for this reason that even if the proposal comes up for consideration of CCEA, there may not be a decision, sources said, adding that in all likelihood the issue may be referred to a group of ministers for further discussion owing to intense opposition from certain lobbies.

Cabinet to consider natural gas price hike on Friday

The gas price, if the suggestion are accepted, would come to USD 6.79 in the immediate future and USD 8.93 by the end of current fiscal.

There was also buzz that the ministry had in fact withdrawn its listed agenda for presenting a status report on implementation of ethanol-blend petrol programme from Saturday's CCEA.

The ministries of Finance, Power and Fertiliser have sent their comments on a revised note floated by Oil Ministry for pricing natural gas, as per the formula suggested by Prime Minister's economic advisor C Rangarajan-headed panel.

The panel had suggested pricing domestic gas at an average of rates at three key international hubs - US Henry Hub, National Balancing Point of UK and well-head prices of supplies into Japan, and the actual cost at which India imports liquid gas (LNG).

Sources said the price as per the formula in the current quarter comes to USD 6.775 per million British thermal unit as against the current rate of USD 4.2 per mmBtu.

Ministry of Finance wanted some changes in the pricing methodology by excluding international hub rates and pricing domestic gas at rate equivalent at the actual cost of LNG to India on a long-term contract.

The gas price, if the Finance Ministry's suggestion are accepted, would come to USD 6.79 in the immediate future and USD 8.93 by the end of current fiscal. It would rise to USD 10.29 in 2014-15 and USD 10.92 in the subsequent year.

Price of gas as per Oil Ministry proposal formula would be close to USD 12 in 2014-15 and USD 14 in the next year. The power ministry, sources said, pitched for a gas price of no more then USD 5 and no change in rates of gas produced by state-owned firms like ONGC, called APM gas.

Oil Ministry has rejected the suggestion of no change in APM price saying producers need to be incentivised to raise output.

The Fertiliser Ministry was largely in agreement with the proposal for revising rates every quarter, sources added. Oil Ministry has proposed raising gas price for state-run firms immediately and that for Reliance Industries from April

2014 when it is contractually due.

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