Govt postpones decision on revision of natural gas prices till 15 Nov

New Delhi: Days ahead of its own deadline for the revision of natural gas prices, government today postponed a decision on it by another 45 days to November 15.

The NDA government, after coming to power, had put off implementation of the previous UPA-regime approved Rangarajanformula, which would have at least doubled rates to USD 8.4per million British thermal unit, till September 30 forholding wider consultations.

The Cabinet headed by Prime Minister Narendra Modideferred a decision on the issue till November 15, Law andTelecom Minister Ravi Shankar Prasad told reporters here.

Incidentally, Finance Minister Arun Jaitley did notattend today’s Cabinet meeting as he is yet to be dischargedfrom the hospital where he was admitted on Sunday evening fora post-surgery check-ups.

The UPA government had in June last year approved a priceformula suggested by a panel headed by C Rangarajan andre-confirmed it in December 2013 with certain conditions forReliance Industries’ eastern offshore KG-D6 block.

The formula was to be implemented from April 1, 2014 butbefore a rate could be notified, general elections wereannounced and Election Commission asked the then government todefer it till completion of polls.

On June 25, the new BJP-led government deferred it for afurther three months as it found doubling of rates as per theapproved formula unpalatable.Oil Minister Dharmendra Pradhan had recently toldParliament that a new gas price will be announced by Septemberend.

In August-end, the government constituted a four-memberpanel of secretaries to review the formula. The committeecomprising of secretaries of power, fertiliser and expenditurewith additional secretary in the Oil Ministry as its membersecretary, last week submitted its recommendation on a newpricing mechanism.

The deferment will also provide political relief to theNDA government which faces crucial electoral test in assemblyelections in Maharasthra and Haryana.

Any increase in gas price would have translated intohigher power tariff and CNG and piped cooking gas rates.Every dollar increase in gas price will lead to a Rs 1,370per tonne rise in urea production cost and a 45 paise per unitincrease 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 inCNG price and a Rs 1.89 per standard cubic metre hike in pipedcooking gas.

The increase in gas price would bring windfall for thegovernment – about USD 2.08 billion (Rs 12,900 crore) fromadditional profit petroleum, royalty and taxes accruing fromdoubling of gas rates, according to Oil Ministry estimates.Sources said there were also sharp difference between OilMinistry and Power Ministry over the quantum of increase.

While the Oil Ministry is in favour of remunerative gasprice that will encourage investments in exploration andproduction, the Power Ministry does not want rates to be hikedby more than 25 per cent over the current price of USD 4.2 permmBtu as a higher fuel cost will push up electricity tariff.

PTI