New Delhi: The Parliament panel on Wednesday submitted its report on gas pricing criticizing the government's decision of doubling natural gas prices. The panel has recommended a review of the gas price hike. It also said that gas price should be linked to output cost as hike in gas price will impact fertiliser, power & steel sectors. Panel's report says that any increase in gas price will have a derailing impact on the economy.
"Government has approved the gas price formula based on the Rangarajan Committee recommendations, which will be applicable from April 1, 2014 for a period of 5 years," Minister of State for Petroleum and Natural Gas Panabaaka Lakshmi said.
The gas price from April 1 would be weighted average price of Indian imports and rates at international hubs like Henry Hub of US, National Balancing Point of UK and Japan imported gas netback price.
"These guidelines will be applicable to all natural gas produced domestically, irrespective of the source, whether conventional, shale or coal-bed methane," she said. But the pricing guidelines would not apply where prices have been fixed contractually for a certain period of time or are governed by a specific formula.
The government had in late June decided to price all domestically produced natural gas at an average of global hub rates and cost of imported LNG. Accordingly, gas price is expected to be in the range of $8.2 to 8.4 per million British thermal unit in April as against current $4.2. "If it is presumed that the city gas distribution entity is operating entirely on domestic gas, the impact of $1 per mmBtu increase in price of domestic gas would result in a price hike of Rs 2.93 per kg of CNG," Lakshmi said.
While CNG supplier in national capital Indraprastha Gas sources 70 per cent of its needs from domestic fields, Mahanagar Gas Ltd buys almost all of its gas from domestic producers. Also, CNG retailers in Gurgaon and Faridabad source almost all of their gas needs from domestic fields. For cities like Mumbai, the $4 per mmBtu hike in natural gas price will translate into Rs 11.72 per kg increase while in Delhi the increase may be about Rs 8.2 per kg.
CNG or compressed natural gas in Delhi currently costs Rs 41.90 per kg and the same in Mumbai is priced at 35.95.
(With additional inputs from PTI)
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