The Hindu Business Line : Govt raises natural gas price by 20 pc

The Government has raised prices of natural gas sold under the administered price mechanism (APM) by 20 per cent to Rs 3,840 per million standard cubic metre (MSCM) for general consumers and Rs 2,304 per MSCM for consumers in the North-East.

The price rise was given effect to from June 5 midnight, but no major public announcement was made. Official sources said the price increase has been effected for industrial users other than power and fertiliser to enable the gas sector to move gradually towards market pricing.

CNG still economical

The sources claimed that the increase was minor when compared to the prices of other petroleum products. Despite the aforesaid prices increase, compressed natural gas (CNG) would still offer around 71 per cent savings towards the running cost when compared to petrol-driven vehicles at the current level of prices. When compared to diesel-driven vehicles, the economics in favour of CNG at revised price would be 41 per cent.

The order issued by the Government to Oil & Natural Gas Corporation, GAIL (India) Ltd and Oil India Ltd, said "it has now been decided to increase the price of APM gas supplied to city gas distribution projects and small consumers with allocation up to 0.05 MSCM by 20 per cent over the current price of Rs 3,200 per MSCM for general consumers and Rs 1,920 per MSCM for North-East consumers.''

A Cabinet decision of 2005 allows the Ministry to raise the prices of APM gas on an ad-hoc basis for consumers, other than power and fertiliser sectors, in a phased manner to bring it at par with market price over the next 3-5 years.

The Ministry's order issued last month also allows GAIL to charge market price for the quantity of gas supplied to Indraprastha Gas Ltd (IGL) and Mahanagar Gas Ltd (MGL), which the two subsequently sell to industrial consumers.

On June 5, IGL, a joint venture of GAIL (India) Ltd, BPCL and the Delhi Government, announced the revised selling price of CNG. The new consumer price of Rs 19.20 per kg was effective from June 5 midnight. The revision in prices resulted in an increase of Rs 1.20/kg in the consumer price of CNG, up from Rs 18/kg.

Explaining the compulsions leading to the increase in the price of CNG, Mr A.K. De, Managing Director, IGL, had said, "The increase in the price of CNG is because of 20 per cent increase in the input cost of natural gas, increase in taxes, duties, royalty thereof and due to increase in the operating expenses."

Mr De clarified that IGL is not revising the price of piped natural gas (PNG) being supplied to domestic and commercial consumers at this point of time.