Fert Min opposes hike in natural gas price ahead of CCEA meet

Ahead of CCEA meeting on fixing domestic natural gas price, the Fertiliser Ministry has written to the Petroleum Ministry opposing any price hike saying this would substantially increase production cost of urea and may lead to higher subsidy burden for the government.

The Petroleum Ministry's proposal on fixing of domestic natural gas price as per the Rangarajan Committee's recommendations has again been listed for discussion in the Cabinet Committee on Economic Affairs (CCEA) meeting scheduled for tomorrow, sources said.

Amid reports that the Fertiliser Ministry has supported the price hike in domestic natural gas, the Department of Fertiliser (DoF) has shot off a letter clarifying that "it had not supported any increase in price of gas" during the inter-ministerial consulation process.

"It appears that the change in methodology of formula of Rangarajan Committee as mentioned in the observation of DoF has been construed as the approval of DoF for pricing formula without taking into account our concerns in totality," it said in the letter.

The Department has categorically said that it does not support any measure which results in increase in cost of production of fertiliser and the subsidy outgo.

As per the Fertiliser Ministry's estimate, the proposed increase in natural gas price, if approved by the CCEA, would either lead to an additional subsidy burden of Rs 6,500 crore annually or the government will have to increase the urea prices to Rs 9,000 per tonne from current Rs 5360 per tonne.

The DoF is also upset that the Petroleum Ministry has ignored its suggestion that the actual cost of production of natural gas be arrived after obtaining the data from PSUs like ONGC and OIL, if not from private entities, in order to have better picture for fixing price of domestic natural gas.

Last week, the CCEA had deferred a decision on a proposal to hike natural gas prices by a steep 60% as Oil Minister M Veerappa Moily was away on an official tour.

The proposal was to raise gas prices to $6.775 million British thermal unit (mmBtu) from current $4.2 mmBtu, which would result in a steep rise in electricity tariff, urea manufacturing cost as well as CNG rates.