The Telegraph
Since 1st March, 1999
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Divided house on gas price

New Delhi, July 2: The group of ministersí meeting to decide on the ticklish natural gas pricing issue has been scheduled for July 8. The deputy chairman of the Planning Commission, K. C. Pant, will chair the meeting which will be attended by petroleum, fertiliser and power ministers.

The inter-ministerial tussle over the nationís natural gas pricing policy seems to be going in favour of the power and fertiliser ministries with the petroleum ministry losing ground on the issue.

The government is not likely to give in to the petroleum ministryís demand to raise the ceiling price for ONGC-produced natural gas to Rs 3,850 per thousand cubic metres (MCM) from the current limit of Rs 2,850 MCM which would constitute an over 50 per cent jump.

Sources say the power and fertiliser ministries are not willing to accept a ceiling price beyond Rs 3,100 per MCM which represents a mere 14 per cent increase. The current indications are that the government is likely to settle the price around this level.

The power and fertiliser ministries are sticking to their stand that a sharp increase in the price of natural gas would prove to be disastrous both for the power and fertiliser sectors and the regulated price regime should continue.

The fact that ONGC has made an over Rs 10,000 crore net profit is also working against a hefty price increase.

However, some changes in the existing policy are likely to be made in the pricing policy of ONGCís joint venture fields which will benefit the oil major.

ONGC is made to pay the private companies, which are its partners, the difference between the market price and the subsidised price at which the gas from these fields is sold to consumers.

Sources disclose that the government is likely to wind up this arrangement so that the gas from the joint venture fields can be sold directly at the market price. These include the Tapti and Panna Mukta fields in the western offshore region where ONGC has to pay Reliance and British Gas the difference between the market price and the lower sale price.

Similarly on the eastern offshore, ONGC has to pay Cairn Energy of the UK and Videocon this difference for Ravva fields. These joint venture fields produce around 5 per cent of the countryís total gas output.

This unjustified drain on ONGC, which works out to around Rs 500 per MCM, would stop and its overall earnings from natural gas would go up.

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