The Hindu : Business : Cabinet nod for hike in natural gas price

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Thursday, May 20, 2010
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Cabinet nod for hike in natural gas price

Special Correspondent

Price will be on a par with that of RIL

NEW DELHI: The Union Cabinet on Wednesday gave its approval for a hike in the price of natural gas supplied under the Administered Pricing Mechanism (APM) by Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), doubling it to $4.20 per mBtu (million British thermal unit) from the present $1.79 per mBtu, bringing it on a par with the price at which Reliance Industries sells its gas.

“The Cabinet has approved the proposal for hike in natural gas prices under the APM regime. Both ONGC and OIL will be the main beneficiaries of this hike as they had been suffering massive losses due to non-revision of prices for the last almost five years,'' Petroleum and Natural Gas Minister Murli Deora said after the Cabinet meeting.

The Cabinet Committee on Economic Affairs (CCEA) that met under the leadership of Prime Minister Manmohan Singh approved the proposal to raise the rate of gas sold to power and fertilizer firms from $1.79 to $4.20 per mBtu. With this decision, ONGC would gain Rs. 5,833.78 crore more revenue a year.

ONGC and OIL will get $3.818 per mBtu price for the gas they produce from fields given to them on a nomination basis and after adding 10 per cent royalty, the fuel will cost $4.20 per mBtu to consumers.

On top of the $4.20 per mBtu, state gas transportation and marketing firm GAIL (India) would be allowed to charge 11.2 cents as marketing margin. Over and above this would be the taxes and other levies and pipeline transportation charges.

While the move will help the state-run firms breakeven in gas business, it would result in hike in electricity generation tariff and fertilizer production cost.

The government controls rates of gas, produced by ONGC and OIL from fields given to them on a nomination basis.

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