Cabinet to decide on gas price hike Thursday

The crucial decision on hiking natural gas prices, that would result in higher electricity and fertiliser costs, will be taken up Thursday by the union cabinet.

The Cabinet Committee on Economic Affairs (CCEA) had last Friday deferred decision on a proposal to hike natural gas prices, as Petroleum Minister M. Veerappa Moily was away on an official tour.

The oil ministry, as per a complex formula based on averaging prices at the international hub as well as of imported LNG suggested by the Rangarajan committee, has proposed raising gas prices to $6.7 per million British thermal unit (mBtu) from the current $4.2 per mBtu.

The rates will increase to $8.55 in April 2014, when Reliance Industries Ltd. is entitled for revision in price for gas from its KG-D6 block.

According to sources, both the power and fertiliser ministries have opposed any hike. The power ministry maintains that electricity generated at any price of over $5 was economically unviable. It has also questioned the logic of pricing the fuel in US dollars as any depreciation in the Indian currency would further add to costs.

In the face of criticism, particularly from the Left parties, Moily has pitched for a gas price hike saying it was essential to incentivise exploration to raise domestic production and cut imports.