The Telegraph
Saturday , June 21 , 2014
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Gas price call soon

Modi: Crucial decision

New Delhi, June 20: The government will shortly be taking a call on raising gas prices, officials said.

Prime Minister Narendra Modi today met a petroleum ministry team, led by minister Dharmendra Pradhan, which advocated a price hike.

The team made a presentation before Modi on the rationale for raising prices to more than $8 per million British thermal unit (mBtu) from $4.2 and urged him to accept the hike to encourage oil and gas exploration.

However, several other ministries, including power, have been strongly arguing in favour of either junking the pricing formula or at the very least tweaking it as they feel such a steep increase will make power plants and fertiliser factories unviable

Officials in inter-ministry meetings have suggested removing spot prices from the formula to reduce the volatility in pricing and ensure the actual increase for the time being does not rise beyond $1-2 per mBtu.

Others have advocated taking into account US shale gas prices to deflate the hike; yet others have opposed the use of international benchmarks for calculating Indian prices as they are higher than domestic rates.

The power ministry had previously circulated a draft note for the Cabinet Committee on Economic Affairs just before the elections which sought subsidy in electricity generation for those using natural gas as fuel.

The note said cost of gas-fired electricity would move up to Rs 6-7 per unit from Rs 3.50-5 a unit on account of the hike.