Gas price to be hiked to $6.8 per unit, clarifies Oil Minister

www.mangaloretoday.com

New Delhi, July 11, 2013: Two weeks after the Cabinet Committee on Economic Affairs (CCEA) cleared the Oil Ministry’s proposal to hike natural gas prices based on a formula suggested by the Rangarajan committee, the Oil Minister on Thursday clarified that the new gas price, which comes into effect from April, 2014, will be $6.8 per million British thermal unit (mmBtu) and not $8.4 as has been widely reported.

Currently the price is $4.2 per mmBtu.

Oil Minister M Verappa Moily also said today that there was no question of a review of the decision to hike prices, allaying fears that the government might consider a roll-back.

"The CCEA decision stands and there is no change, the government is not contemplating any change," Mr Moily said.
 
It was for the first time in three years that the government approved a hike in gas prices, a move which could inject much needed investment in local production, but boost imports of more costly LNG.
 
Politically it is an unpopular step and opposition parties have alleged that the gas price hike was approved so that the Mukesh Ambani-owned Reliance Industries could receive windfall gains. The Oil Ministry stoutly has rebutted the allegations.
 
Yesterday Reuters reported that the Finance Ministry had asked the Oil Ministry to examine issues raised by the new pricing policy, which could significantly increase prices of local gas.

In a letter to the Oil Ministry, which has been seen by Reuters, the finance ministry listed concerns flagged by various newspaper editorials for "appropriate" action. Among the issues raised was capping the gas price and ensuring Reliance delivers any shortfall it owes to customers at the old price of $4.2 per million British thermal units.

"It cannot be that gas producers will reap unlimited gains in the case of an upswing in global prices; any upside has to be capped," the Finance Ministry said in the letter, quoting a newspaper editorial.
 
RIL stocks fell 1.94 per cent yesterday on news of the finance ministry’s letter, though officials at the ministry said the letter was not aimed at suggesting a review of last month’s cabinet decision on gas pricing. They said it was more a "fact-finding mission."

Demand for gas in India far outstrips consumption, but prices have been kept low for strategic industries, deterring investment in the sector. India has few energy resources other than coal and is the world’s fourth-biggest importer of fuel.