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Govt to double gas price, fuel power and CNG inflation

The Union Government on Thursday approved a near doubling of natural gas prices to $8.4 per mmBtu from 1 April, 2014, a move which will result in rise in power tariffs, urea costs and CNG prices. The Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Manmohan Singh, approved the Petroleum and and Natural Gas Ministry’s proposal to price all domestically produced natural gas as per the formula suggested by a panel headed by Prime Minister’s Economic Advisory Committee (PMEAC) Chairman C Rangarajan.

The new price will apply uniformly to all producers, be it state-owned firms like Oil and Natural Gas Corp (ONGC) or private players like Reliance Industries. While it was previously said the new rates would immediately apply to regulated or APM gas produced by firms like ONGC, the pricing as per Rangarajan formula will come into effect from April 1, 2014, just when RIL’s KGD6 formula of $4.2/mmBtu runs out. The Rangarajan formula would be applicable for five years.

The Rangarajan formula uses long-term and spot liquid gas (LNG) import contracts as well as international trading benchmarks to arrive at the price for India. While the Rangarajan panel had recommended revising domestic gas prices every month based, the Oil Ministry changed it to a quarterly revision.
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