PetroMin proposes 33% hike in ONGC, OIL gas price

The Petroleum Ministry has proposed a 33 per cent hike in the price of natural gas produced by ONGC and Oil India and gradually increase it to $4.20 per mmBtu set for gas from Reliance Industries' (RIL) KG-D6 fields.

The ministry has circulated a Cabinet note for raising price of gas under administered pricing mechanism (APM) from Rs 3,200 per thousand cubic meters ($1.8 per mmBtu) to Rs 4,250 per thousand cubic meters ($2.4 per mmBtu).

Price of APM, or the gas produced from fields given to ONGC and OIL on nomination basis, is proposed to be raised in stages to Rs 7,500 per thousand cubic meters or $4.2 per million British thermal unit by 2013, official sources said.

The price set for RIL's eastern offshore KG D-6 gas ($4.2 per mmBtu) is being considered as the benchmark for market price of indigenously produced gas in the country, they said.

Producer price for ONGC is proposed at Rs 3,870 per thousand cubic meters from Rs 3,200 per thousand cubic metre. The consumer price would be 10 per cent higher than this.

For OIL, the producer price has been proposed at Rs 4,310 per thousand cubic metres, they said.

Sources said the proposed prices are in line with the Tariff Commission (TC) recommendation, which in 2005 suggested a producer price of Rs 3,600 per thousand cubic meters to ONGC and Rs 4,040 per thousand cubic meters to OIL. On top of this, the price would change by Rs 55 per thousand cubic metre for every 10 points change in Wholesale Price Index (WPI).

WPI has risen by 49 points since the TC recommendation.

Sources said the hike in natural gas price was necessiated as ONGC and OIL were losing about Rs 3,000 crore annually on gas business as prices were lower than cost.

The increase in gas price would lead to a hike in fertiliser and power generation cost but would also give the government around Rs 750 crore more in taxes and royalty in the current year. This would rise to Rs 4,500 crore in 2013 when prices are brought at par with RIL gas price.

The price hike proposal, sources said, would be put up to the Cabinet Committee on Economic Affairs (CCEA) after obtaining comments from the concerned ministries.

Sources said consumer price for power and fertiliser units outside North-East would be fixed at 10 per cent above the producer price while for the plants in North-East it would be 60 per cent of the price.

Consumer price for transport and small consumers outside North-East may be fixed at 20 per cent above the price for power and fertiliser sectors.

Price of gas produced by ONGC and OIL from fields given to them on nomination basis, called the administered or APM rate, were last revised in June 2005.

The difference between consumer price and producer price outside North-East would be transfered to ONGC for research and development activities for maintaining/increasing the production of gas from nominated fields, sources said.

All natural gas produced from nominated gas fields (excluding new fields) will be treated as APM gas, while the fuel produced from new fields would be allowed to be sold at the market price.