The Hindu Business Line : Govt considering hike in natural gas price

The Petroleum Minister, Mr Mani Shankar Aiyar, will have to contend with the views of the Government's alliance partners, the Left parties, who are likely to oppose the hike.

New Delhi , Aug. 6

THE Petroleum Ministry is reviving an earlier proposal for a hike in the price of natural gas supplied by Oil and Natural Gas Corporation (ONGC). If implemented, power sector consumers who account for 42 per cent of the natural gas consumption, will be burdened with an additional bill of Rs 550 crore.

The fertiliser consumers, who account for 34 per cent of natural gas consumption, will also bear the brunt.

The proposal, approved by a Group of Ministers (GoM) in July last year, proposes a Rs 350 per thousand cubic metres hike in domestic natural gas price as well as a Rs 10 per thousand cubic metres per day hike in transportation cost. The latter will accrue to GAIL (India) Ltd.

"ONGC has been pushing for a hike in gas prices. We are considering it actively. A presentation will be shortly made before the Petroleum Minister who will then decide on whether or not to take it up to the Cabinet for approval," an official said.

Although the GoM, which represented the user as well as producer industries, had firmed its recommendations for the approval of the Cabinet in July last year, the earlier BJP-led Government decided against considering it since the general elections were round the corner.

This time around, the Petroleum Minister, Mr Mani Shankar Aiyar, will have to contend with the views of the Government's alliance partners, the Left parties, who are likely to oppose the hike.

The price revision proposal, which was termed by the GoM as an interim compensation, if effected, will enrich ONGC by around Rs 1,500 crore per annum. The GoM had recommended that the final revision be made once the Tariff Commission, whose services were requisitioned by the GoM, puts forward its recommendations.

Currently, ONGC realises Rs 2,850 per thousand cubic metres for its natural gas, while GAIL nets Rs 1,160 per thousand cubic metres per day.

For the power consumer, the additional bill of around Rs 550 crore would be mainly borne by the northern States, where around 4500 MWs of gas-based power generation capacity operates.

For ONGC, the GoM recommendations if implemented, would bring in gains on three counts. A straightforward gain would be on account of the increase in price for its 61-odd million standard cubic metres of gas (mmscmd) production, netting a profit of around Rs 500 crore.

Secondly, ONGC buys gas from joint venture fields amounting to 9 mmscmd at market prices and sells it at a capped price of Rs 2,850 per mcmd to the consumer. Last year, the subsidy bill on this count worked out to Rs 950 crore. On this, the GoM has proposed that ONGC sells the entire joint venture production at market prices, save 1 mmscmd from the Ravva satellite fields in Andhra Pradesh. This gain would be of the order of around Rs 700 crore.

Another gain would arise on account of a lower obligation towards the gas pool account, which subsidises sale of gas in the north-eastern regions of the country. Currently, ONGC pays the account around Rs 250 crore. The GoM has recommended a limit of Rs 100 crore.