Reform Push: Diesel price deregulated, natural gas price hiked

In a major reform push, the government today deregulated diesel prices but hiked natural gas tariff by 46 per cent that will push up fertiliser, power, CNG and PNG rates.
The deregulation of diesel will bring down rates by Rs 3.37 a litre from midnight tonight and will move in tandem with international cost from next month.
This will be the first reduction in diesel rates in over five years. Diesel price were last cut on January 29, 2009 when they were reduced by Rs 2 a litre to Rs 30.86. Rates had since climbed to Rs 58.97. It will cost Rs 55.6 per litre in Delhi from tomorrow.

After deregulation, government will no longer provide subsidy on diesel.
The long-pending decisions in the oil sector were taken at a Cabinet meeting headed by Prime Minister Narendra Modi here.
Against the backdrop of the steep doubling of rates to USD 8.4 recommended by Ranagarajan Committee and cleared by the previous UPA government, the government today approved a 46 per cent increase in natural gas prices that will go up from current USD 4.2 per million British thermal unit to USD 6.17 per mmBtu from November 1.

Briefing reporters, Finance Minister Arun Jaitley said the price was "sufficient incentive for drilling and investment" while at the same time "not excessively burden the consumers."

The gas price hike, according to a modified formula approved by the Cabinet, comes to USD 5.61 per mmBtu on gross-calorific value basis and USD 6.17 as per net calorific value - the principle used for calculating current USD 4.2 rate.
Rates for the gas produced by Mukesh Ambani-run Reliance Industries as well as state-owned ONGC will be revised every six months with the next review happening on April 1.
The natural gas price increase will result in CNG prices going up by Rs 4.25 per kg and piped cooking gas by Rs 2.6 even though Oil Minister Dharmendra Pradhan said states are being impressed upon to cut taxes to reduce the burden.

Besides, tariff for power produced from gas will go up by about 90 paisa per unit and fertilizer production cost by almost Rs 2,720 per ton.
RIL will however not get the new gas price for its currently producing Dhirubhai-1 and 3 gas fields in eastern offshore KG-D6 till it makes up for the shortfall in production in the past four years.
D1&D3 is producing under 8 million standard cubic meters per day against a committed 80 mmscmd. Consumers of RIL gas will have to pay higher rates but RIL will get only USD 4.2, with the difference being credited to a gas pool account maintained by GAIL.

RIL will get the higher price if it is able to prove legally that output fall was not deliberate and was due to geological reasons as it claims.