Gas pricing: Cabinet likely to take up rate hike issue today

New Delhi: The Cabinet Committee on Economic Affairs (CCEA) is likely to consider today raising natural gas prices amidst sharp difference between the oil ministry and power ministry over the quantum of increase.

The CCEA headed by Prime Minister Narendra Modi is scheduled to meet this evening and revision in natural gas prices is listed as an agenda for the meeting, sources privyto the development said.

 Gas pricing: Cabinet likely to take up rate hike issue today

Representational Image. Reuters

While the oil ministry is in favour of remunerative gas price that will encourage investments in exploration and production, power ministry does not want rates to be hiked by more than 25 per cent over the current price of $4.2 per million British thermal unit as a higher fuel cost will push up electricity tariff.

If the differences are not resolved, the CCEA may put-off a decision by a month, sources said.

In a case a decision is put-off today, the government will miss its own deadline of announcing a new rate by month end.

The previous UPA government had in June last year approved a price formula suggested by a panel headed by C Rangarajan and re-confirmed it in December 2013 with certainconditions for Reliance Industries' eastern offshore KG-D6 block.

The formula was to be implemented from April 1, 2014 but before a rate could be notified, general elections were announced and Election Commission asked the then government to defer it till completion of polls.

On June 25, the new BJP-led government deferred it for a further three months as it found doubling of rates as per the approved formula unpalatable.

Oil Minister Dharmendra Pradhan had told Parliament that a new gas price will be announced by September end but if the CCEA fails to take a decision today, then that deadline will be missed as Modi will leave for US tomorrow afternoon.

Modi, who will launch the "Make in India" campaign on Thursday morning to promote manufacturing in the country, will return in the evening of October 1.

A committee comprising of secretaries of power, fertilizer and expenditure with additional secretary in the oil ministry as its member secretary, last week submitted its recommendation on a new pricing mechanism.

Every dollar increase in gas price will lead to a Rs 1,370 per tonne rise in urea production cost and a 45 paise per unit increase in electricity tariff (for just the 7 per cent of the nation's power generation capacity based on gas).

Also, there would be a minimum Rs 2.81 per kg increase in CNG price and a Rs 1.89 per standard cubic metre hike in piped cooking gas.

The increase in gas price would bring windfall for the government -- about USD 2.08 billion (Rs 12,900 crore) from additional profit petroleum, royalty and taxes accruing from doubling of gas rates, according to oil ministry estimates.

PTI

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Updated Date: Sep 24, 2014 12:47:10 IST