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Two days after the Government announced the new base price for domestically produced gas, confusion arose on whether the rates have been calculated on gross calorific value or net calorific value.
The Government statement of October 18 said: “The price so notified would be applied prospectively with effect from November 1 and would be on gross calorific value basis as input prices in the formula are on GCV basis”. But, the price of $5.61 a unit (gas is measured in million British thermal units) announced was on net calorific value. The heat produced from natural gas is measured in calorific value. Gas producers prefer gross calorific value as it gets them higher price realisation for the entire volume, whereas net payment is made after discounting for fuel impurities.
In fact, on Monday, the country’s largest public sector oil explorer ONGC also sought a clarification from the Ministry for Petroleum and Natural Gas. This led to the Ministry issuing a statement clarifying that the price of $5.6/unit has been worked out on net calorific value and not on gross calorific value.
In other words, the price according to the new formula (earlier $4.2/unit) will be $5.6/unit and not $6.17/ $6.2/unit. Based on the formula approved by the Cabinet, the new gas price on gross calorific value basis actually works out to $5.05/unit, according to the Ministry. On this will be added local levies, transmission tariff, marketing margins, among other components.
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