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Hint of cap on gas price hike

New Delhi, Nov. 27: The government plans to put a cap on the extent to which natural gas prices can be hiked when the new pricing formula comes into effect from April.

“Suggestions have been made that there has to be a cap on the price. There is also a suggestion that we should exclude spot (LNG) deals from the formula because they are very volatile. The cabinet will take a decision (on these) shortly and we will notify the gas pricing formula,” petroleum secretary Vivek Rae told reporters on the sidelines of a CII event here.

The Union cabinet had in June decided to price all domestic natural gas at an average of the rates prevailing at international trading hubs and the actual cost of importing liquid gas.

The formula will be effective from April 1, 2014, for a period of five years, with the price being revised quarterly. The price from April is estimated at around $8.40 per million British thermal unit (mBtu), which is double the current price of $4.20 per mBtu.

While the finance ministry wants a ceiling price as producers will reap unlimited gains in the case of an upswing in global rates, the power ministry feels any price of more than $5 per mBtu will jack up the cost of electricity.

Rae, however, said there was no question of going back on the decision to revise prices.

“There is no possibility of a revision in the formula. The only thing is whether to include or exclude spot (LNG) transactions and whether to have a cap or not.”

He said the cabinet was likely to decide by the end of next week.

The new formula has also not been notified because of a dispute over whether the new rates will be applicable to Reliance Industries as it has not produced the targeted output from the eastern offshore KG-D6 block, Rae said.

Rae said India would soon send a delegation to Tehran to settle the payment issue with Iran and increase crude imports from the West Asian country.

 
 
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