New gas price may be notified on May 18 after poll code ends

The Union ministry of petroleum and natural gas plans to notify the new price of domestically produced natural gas on May 18, once the model code of conduct for the elections is lifted, assuming officials don't wait for the new minister's consent.

Incumbent minister Veerappa Moily had reversed his earlier decision on the increase, stating it should apply with retrospective effect from April 1, from his earlier stance of doing so from July 1. “Since the decision was cleared long back by the Cabinet Committee of Economic Affairs, the new notification should be in place by May 18. However, a debate is going on whether it should be with retrospective effect or not,” said a senior ministry official close to the development.

On April 21, Moily said the prices would be applicable from July 1; he changed the stand a day after.

With clarity not fully there on the issue, the Fertiliser Association of India (FAI) cautioned the government on Wednesday that a delay in payment of subsidy would make the industry unviable and uncompetitive. In a letter to the ministry of chemicals and fertilisers, it added the gas price rise would swell the subsidy outgo on urea sales by at least Rs 10,000 crore annually. Domestic natural gas prices are expected to almost double from $4.2 a unit to above $8.2 a million British thermal units, based on a formula recommended by a panel chaired by C Rangarajan, the Prime Minister's Economic Advisory Council chief.

FAI, criticising the Rangarajan formula, said: “The price of domestic gas should not be linked to imported LNG prices. The (new) formula for determination of price is very complex, with basic data not available in the public domain. Therefore, the price so determined will invariably be challenged. The domestic gas price should be in Indian rupees, not US dollars. In fact, domestic gas prices in dollars was introduced only five years ago; consequently, the price of domestic gas is rising continuously in rupee terms.”