CCEA to consider gas price hike tomorrow

The Cabinet will tomorrow decide on raising natural gas prices for the first time in three years even as the move faces stiff resistance as it would result in rise 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.
It wants gas prices to be revised every quarter till 2017 when rates will be completely freed, sources said.

If approved, gas price will rise to USD 6.775 per million British thermal unit from USD 4.2 currently. The rates will jump to USD 8.55 in April 2014 when Reliance Industries is entitled for revision in price for its eastern offshore KG-D6 gas.
Sources said power and fertiliser ministries have strongly opposed the move as it would result in cost of electricity generation rising to unviable levels and steep jump in urea subsidy.
Also, Left parties have alleged that Oil Minister M Veerappa Moily is trying to help RIL by proposing a price 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.