In a blow to Reliance Industries Ltd (RIL), the Narendra Modi Government on Saturday approved a 46 per cent increase in natural gas prices instead of a steep doubling of rates to $8.4 as recommended by the Ranagarajan Committee and cleared by the previous UPA government. Rates will go up from the current $4.2 per million British thermal unit to $6.17 per mmBtu from 1 November.
Briefing reporters, Finance Minister Arun Jaitley said the price was ‘sufficient incentive for drilling and investment’ while at the same time ‘not excessively burden the consumer’s The gas price hike, according to a modified formula approved by the Cabinet, comes to $5.61 per mmBtu on gross-calorific value basis and $6.17 as per net calorific value — the principle used for calculating current $4.2 rate.
Rates for the gas produced by Mukesh Ambani-run Reliance Industries as well as state-owned ONGC will be revised every six months with the next review happening on April 1. The natural gas price increase will result in CNG prices going up by Rs 4.25 per kg and piped cooking gas by Rs 2.6 even though Oil Minister Dharmendra Pradhan said states are being impressed upon to cut taxes to reduce the burden.
Besides, tariff for power produced from gas will go up by about 90 paisa per unit and fertilizer production cost by almost Rs 2,720 per ton. RIL will however not get the new gas price for its currently producing Dhirubhai-1 and 3 gas fields in eastern offshore KG-D6 till it makes up for the shortfall in production in the past four years.
D1&D3 is producing under 8 million standard cubic meters per day against a committed 80 mmscmd. Consumers of RIL gas will have to pay higher rates but RIL will get only $4.2, with the difference being credited to a gas pool account maintained by GAIL.
RIL will get the higher price if it is able to prove legally that output fall was not deliberate and was due to geological reasons as it claims.
Briefing reporters, Finance Minister Arun Jaitley said the price was ‘sufficient incentive for drilling and investment’ while at the same time ‘not excessively burden the consumer’s The gas price hike, according to a modified formula approved by the Cabinet, comes to $5.61 per mmBtu on gross-calorific value basis and $6.17 as per net calorific value — the principle used for calculating current $4.2 rate.
Rates for the gas produced by Mukesh Ambani-run Reliance Industries as well as state-owned ONGC will be revised every six months with the next review happening on April 1. The natural gas price increase will result in CNG prices going up by Rs 4.25 per kg and piped cooking gas by Rs 2.6 even though Oil Minister Dharmendra Pradhan said states are being impressed upon to cut taxes to reduce the burden.
Besides, tariff for power produced from gas will go up by about 90 paisa per unit and fertilizer production cost by almost Rs 2,720 per ton. RIL will however not get the new gas price for its currently producing Dhirubhai-1 and 3 gas fields in eastern offshore KG-D6 till it makes up for the shortfall in production in the past four years.
D1&D3 is producing under 8 million standard cubic meters per day against a committed 80 mmscmd. Consumers of RIL gas will have to pay higher rates but RIL will get only $4.2, with the difference being credited to a gas pool account maintained by GAIL.
RIL will get the higher price if it is able to prove legally that output fall was not deliberate and was due to geological reasons as it claims.