Natural gas price up 10% for non-priority sectors

Move to boost ONGC’s annual revenue by Rs 200 crore.

The government has increased prices of natural gas in non-priority sectors such as steel and petrochemicals by 10 per cent with effect from December 1. The increase will benefit Oil India Ltd (OIL) and Oil and Natural Gas Corporation (ONGC) that sell around eight million standard cubic metres per day to such sectors.

“The increase of around 10 per cent will take the new gas price to $5.25 per million British thermal units (mBtu) from $4.75. This gas is sold to non-power and non-fertiliser sectors,” said a petroleum ministry official.

The rate is excluding cess, transportation charge, marketing margin/service charge and taxes. Natural gas produced by ONGC and OIL from fields given to them on a nomination basis is sold at a government-controlled price, called the APM (Administered Pricing Mechanism) rate.

The APM price for priority sectors like power and fertiliser had more than doubled to $4.2 per mBtu in June, but other sectors continued to buy the fuel at the 2005 price of $4.75 per mBtu. “The anomaly has now been corrected,” the official said.

The decision would result in ONGC revenues going up by about Rs 200 crore annually. According to the petroleum ministry order, consumers in western and northern parts (states of Maharashtra, Gujarat and other states covered by GAIL’s Hazira-Vijaipur-Jagdishpur and Dahej-Vijaipur pipeline such as Rajasthan, Madhya Pradesh, Uttar Pradesh, Haryana and Delhi) will pay $5.25 per mBtu.

Users in Rajasthan, south Gujarat and isolated customers in Gujarat, which are getting gas from identified onshore fields, would be charged $5 per mBtu while the same in Tamil Nadu and Andhra Pradesh would pay $4.75 per mBtu and $4.5 per mBtu, respectively. Consumers in the north-eastern region would pay $4.2 per mBtu.

The official said the government had in 2005 decided that APM gas would be sold only to the power and fertiliser sectors and small users. But some non-priority users not connected to any other source were allowed to continue using the gas, if they paid at market price.

So, users in the western region paid $4.75 per mBtu, a rate equivalent to the then prevalent price of gas from privately-operated Panna-Mukta and Tapti fields. Consumers on the east coast paid $4.3 per mBtu, the same as charged by Cairn India for gas from the Ravva fields.

Naturally, these rates should have also been increased when the price of gas from Panna-Mukta and Tapti fields was revised to $5.73 per mBtu. But this did not happen.

The government, from June 1, raised APM gas price for core consumers to $4.2 per mBtu, on a par with the rate at which Reliance Industries sold gas from its KG-D6 fields.

APM gas, before June 1, was sold at Rs 3,200 per thousand cubic metres, or $1.79 per mBtu.