GAIL-commissioned study opposes single price across sectors

GAIL-commissioned study opposes single price across sectors
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First Published: Wed, Feb 17 2010. 10 29 PM IST
Updated: Wed, Feb 17 2010. 10 29 PM IST
New Delhi: A study commissioned by state-owned GAIL (India) Ltd, the country’s monopoly gas supplier, advises against a single price for natural gas sold to various sectors—as being mulled by the petroleum ministry.
Instead the study suggests different uniform gas prices for different sectors such as power, fertilizer and petrochemicals, among others.
“The study was submitted in the last week of January to GAIL,” said a person aware of the recommendations who spoke on condition of anonymity. “The study is not in favour of a single-pool price across sectors.”
GAIL will process the study, carried out by energy consultancy Mercados EMI Asia, before forwarding it to the ministry in a few weeks.
There has been a demand for a uniform price of gas, given the price differential of the fuel sourced through different arrangements.
Gas from the Reliance Industries Ltd-operated KG D6 field in the Krishna-Godavari basin is priced at $4.20 (Rs193.20) per million British thermal unit (mmBtu), compared with $1.82 per mmBtu for gas produced by state-run Oil and Natural Gas Corp. Ltd (ONGC) and Oil India Ltd (OIL). Gas from the BG Group Plc-operated Panna, Mukta and Tapti fields off the west coast costs $5.73 per mmBtu and Ravva gas off the Andhra Pradesh coast is priced at $5.50.
Petroleum secretary S. Sundareshan said the difference in gas prices was unfair on customers. “I am not saying there should be arithmetical equality, but approximate equitable prices all over the country (is desirable),” he said.
India has recoverable natural gas reserves of 119.55 billion cu. m and produced 32,847 million cu. m in 2008-09.
“You could have a pooled pricing mechanism, which will be approximately having equal prices, but for which you would require an entity to manage this whole system of pooled pricing, maintain the accounts and distribute it, and so on,” Sundareshan said.
“Another solution which has great credibility could be that we could have sectoral pricing,” he added. “We should be taking some decisions in the course of next few months,” Sundareshan said
A GAIL spokesperson declined to comment. Chairman and managing director B.C. Tripathi and finance director S.K. Goel didn’t respond to repeated phone calls and messages sent to their mobile phones.
Meanwhile, the petroleum ministry will be taking a note to the Union cabinet to increase the price of gas from state-owned firms to around $2.60 per mmBtu.
An increase in gas prices will curtail ONGC and OIL’s losses. It will also push up fuel costs for the sensitive power and fertilizer sectors, putting pressure on them to pass it on to consumers.
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First Published: Wed, Feb 17 2010. 10 29 PM IST