CCEA to consider doubling gas price tomorrow

The Cabinet will tomorrow consider doubling the natural gas prices to USD 8.42 even as the first revision in 3 years faces stiff resistance due to resultant increase in electricity tariff and fertiliser cost.
The Oil Ministry's proposal to price all domestically produced natural gas as per a complex international hub and imported LNG-based formula suggested by the Rangarajan panel is listed as item number 8 on the agenda of Cabinet Committee on Economic Affairs (CCEA) meeting scheduled for tomorrow.
The price formulation is to come into effect from April 1, 2014 for all domestically produced gas - be it that of state-owned companies like ONGC or private firms like Reliance Industries, and rates will be revised every quarter till 2017 when prices will be completely freed, sources said.

The price of gas if CCEA accepts the proposal will be USD 8.42 per million British thermal unit as opposed to USD 4.2 currently. The rates are higher than USD 6.775 that the Ministry had been propagating to temper opposition.
Sources said power and fertiliser ministries have opposed the move as it would result in cost of electricity generation rising to unviable levels and steep jump in urea subsidy.
Left parties have alleged that Oil Minister M Veerappa Moily is trying to help RIL by proposing a steep hike.

The CCEA, some government insiders say, may not accept the Oil Ministry's proposal of revising prices every three months based on quarterly average of international hub and imported gas (LNG) price.

It may approve a 'moderate' revision but put a cap or ceiling of no more than USD 7 per mmBtu as it would be not advisable to have a fuel cost with cascading impact on the economy, change every quarter and that too based on international volatility.
Sources said there was also a possibility of the issue being referred to a ministerial panel for wider consultation.