Govt hikes natural gas price by 10%

Govt hikes natural gas price by 10%

New Delhi: The government has approved a 10% hike in price of natural gas that state - owned firms like Oil and Natural Gas Corp (ONGC) sell to consumers in non-priority sectors such as steel and petrochemicals.

“Effective 1 December, ONGC and OIL have been allowed to charge up to $5.25 per million British thermal unit for 7-8 million standard cubic meters per day of gas that is sold to non-power and non-fertilizer sector," a senior government official said.

The rates set would be excluding cess, transportation charge, marketing margin/service charge and taxes.

Natural gas produced by ONGC and Oil India Ltd (OIL) from fields given to them on nomination basis is sold at government controlled price, called APM (Administered Pricing Mechanism) rate.

The APM price for priority sectors like power and fertilizer was in June more than doubled to $4.2 per mmBtu, but users in other sectors continued get the fuel at 2005 price of up to $4.75 per mmBtu.

“The anomaly has now been corrected," the official said.

The decision would result in ONGC revenues going up by about Rs200 crore annually.

As per the oil Ministry order, consumers in western and northern part (states of Maharashtra, Gujarat and other states covered by GAIL’s Hazira-Vijaipur-Jagdishpur and Dahej- Vijaipur pipeline such as Rajasthan, Madhya Pradesh, Uttar Pradesh, Haryana and Delhi) will pay $5.25 per mmBtu.

Users in Rajasthan, south Gujarat and isolated customers in Gujarat, which are getting gas from identified onshore fields, would be charged $5 per mmBtu while the same in Tamil Nadu and Andhra Pradesh would pay $4.75 per mmBtu and $4.5 per mmBtu respectively. Consumers in North-East region would pay $4.2 per mmBtu.

The official said the government had in 2005 decided that APM gas will be sold only to power, fertilizer and small users. But some non-priority users not connected to any other source were allowed to continue using the gas subject to they paying a market price.

So, users in western region paid $4.75 per mmBtu, a rate equivalent to the then prevalent price of gas from privately-operated Panna/Mukta and Tapti fields. Consumers on the east coast paid $4.3 per mmBtu, the same price as charged by Cairn India for gas from Ravva fields.

Naturally, these rates should have also been increased when Panna/Mukta and Tapti field gas price was revised to $5.73 per mmBtu. But this did not happen.

The government had from 1 June raised APM gas price for core consumers to $4.2 per mmBtu, at par with the rate at which Reliance Industries sells gas from its KG-D6 fields.

APM gas, prior to 1 June, was sold at Rs3,200 per thousand cubic metres or $1.79 per mmBtu.