The Hindu Business Line : Petroleum Ministry moots ad hoc hike in gas price

THE Government has proposed an ad hoc hike of Rs 350 per thousand cubic metre in the price of natural gas produced by Oil and Natural Gas Corporation.

Power sector consumers, who account for 42 per cent of natural gas consumption, will be burdened with an additional bill of around Rs 550 crore per annum. This will be borne mainly by the northern States, where there is a 4,500 MWof gas-based power generation capacity.

For fertiliser consumers, who account for another 34 per cent consumption, the hike will reflect as higher subsidy from the Government since the retail price is controlled.

The Petroleum Ministry this week floated a Cabinet note that mooted an across-the-board hike of Rs 350 per thousand cubic metres in natural gas price from the current level of Rs 2,850 per thousand cubic metres.

Pipeline transportation charges are also sought to be raised by Rs 10 per thousand cubic metres, which will accrue to GAIL (India) Ltd.

A Group of Ministers had approved the proposal in July last year as an ad hoc measure till the Tariff Commission reviews the producer cost.

For ONGC, the Cabinet proposal if approved, will bring in gains on three counts. A straightforward gain will be due to the increase in price for its 57-odd million standard cubic metres of gas (mmscmd) production, netting a profit of around Rs 500 crore per annum.

Secondly, ONGC buys gas from joint venture fields amounting to 9 mmscmd at market prices (Rs 6,000 per thousand cubic metres) and sells it at a capped price of Rs 2,850 per thousand cubic metres to the consumer. Last year, the subsidy bill on this count worked out to around Rs 1,000 crore per annum. Since the capped price is being raised to Rs 3,200 per thousand cubic metres, the subsidy hit will reduce.

Another gain will arise on account of a lower obligation towards the gas pool account, which subsidises sale of gas in the northeastern regions of the country. Currently, ONGC pays the account around Rs 250 crore. The Petroleum Ministry is recommending a limit of Rs 100 crore.

Overall, GAIL supplies around 66 mmscmd of gas against an allocation of 117 mmscmd. The power sector gets only 52 per cent of its allocation; fertiliser 65 per cent and the remaining consumers get around 51 per cent of the allocation made by the Government.

In this context, the Cabinet proposal states that the two sectors - power and fertiliser - would be accorded priority in supply of natural gas.