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Economy Jun 6, 2013

Gas price hike: PMO returns petroleum ministry’s note

New Delhi: Weeks after its proposal to a ministerial panel for an across-the-board doubling of natural gas prices was sent back, the petroleum ministry's note to a cabinet committee for raising gas prices by at least 60 percent has been returned by the Prime Minister's Office.

The ministry had in March moved a draft proposal for the consideration of an Empowered Group of Ministers (EGoM) headed by Defence Minister AK Antony for revising prices of gas produced by state-owned firms as well as private sector Reliance Industries as per the formula suggested by the Rangarajan Committee.

No gas price hike for now. Reuters

No gas price hike for now. Reuters

The Cabinet Secretariat returned proposal saying that the new pricing formula, which would have led to prices going up from current $4.2 per million British thermal unit to about $8.8, was not covered under the EGoM's terms of reference.

The ministry then moved the same proposal for consideration of the Cabinet Committee on Economic Affairs (CCEA) with minor modifications, sources privy to the development said.

However, the Prime Minister's Office (PMO) sent back the note saying views of the concerned ministries on the changes made since circulation of the EGoM note, need to be sought.

Sources said the ministry had not sought comments from any of the concerned ministries on the CCEA note that had modified the earlier proposal so that the immediate gas price increase came to $6.775 per million British thermal unit.

In the CCEA note it had attached the comments that ministries like finance, power and fertiliser had given on the EGoM note.

The petroleum ministry had wanted its note to have been listed for consideration of the CCEA directly. However, the PMO desired that views of the concerned ministries may be sought on changes made since circulation of the EGoM note.

The ministry, they said, has now asked the ministries of finance, power, fertiliser, law, heavy industries, steel and department of chemicals and petrochemicals to give their comments on the changes made.

Once the comments are received, the ministry will incorporate them in the CCEA note and move a revised one as soon as possible.

Its proposal for raising gas price for state-run firms immediately and that for RIL from April 2014 will not be diluted, sources said.

The hike in natural gas price by $1 would result in Rs 3,155 crore per annum hit on fertiliser plants for producing 23 million tonnes of urea this fiscal and Rs 4,144 crore a year for 32 million tonnes of urea production from 2017-18, sources added.

The impact of every dollar hike in gas price would be about Rs 10,040 crore per annum on the power sector.


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