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Gas price hike move gains momentum

New Delhi, April 11: A proposal to hike the price of natural gas produced by ONGC and Oil India from government-nominated fields is likely to be taken up by the cabinet later this month.

“The cabinet is expected to take a call on increasing the price of gas sold through the administered price mechanism (APM) soon,” a senior petroleum ministry official said.

The petroleum ministry has sought an increase in the APM gas price to $2.4 per million British thermal unit (mBtu) from $1.8 mBtu. Eventually, it wants the price to be raised to $4.2 per mBtu, which is the one recommended by an empowered group of ministers for the gas produced from Reliance Industries’ fields in the Krishna-Godavari basin. This is a step towards removing ambiguities in a market having more than a dozen rates, officials said.

Besides the $1.8 per mBtu in ONGC and Oil India’s case, prices range from $3.5 per mBtu to $5.73 per mBtu for gas from the blocks awarded before the introduction of the New Exploration and Licensing Policy in 1999. Gas from RIL’s eastern offshore KG-D6 field is priced at $4.20 per mBtu.

APM gas constitutes 55.6 million standard cubic metres a day (mmscmd), or around 40 per cent, of India’s gas production of 140 million mmscmd.

According to officials, ONGC will gain nearly Rs 2,000 crore annually if the price is raised to $2.40 per mBtu. Prices were last revised in June 2006.

In addition, the hike will ease the subsidy burden of ONGC and Oil India. The subsidies are given to PSU oil marketing companies for selling petrol, diesel, LPG and kerosene below cost.

Indian Oil Corporation, Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited — the three state-owned marketing firms — are likely to suffer a revenue loss of Rs 79,670 crore this fiscal if the government does not hike fuel prices or allow their free pricing.

The three fuel retailers lost Rs 47,960 crore on selling products below cost in 2009-10. At present, they sell petrol at a loss of Rs 6.12 per litre and diesel at a loss of Rs 4.60 a litre.

Loss on account of kerosene sold through the public distribution system is Rs 18.42 per litre and domestic LPG cylinder is Rs 265.27 per 14.2kg cylinder.

The budget for 2010-11 has allocated Rs 3,108 crore for LPG and kerosene subsidies.

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