Finance minister Arun Jaitley. Photo: Pradeep Gaur/Mint
Finance minister Arun Jaitley. Photo: Pradeep Gaur/Mint

Gas pricing will ensure profit, not windfall profit: Arun Jaitley

Jaitley says the increase in gas price, approved by the CCEA, balances interests of oil and gas explorers and consumers

New Delhi: Days after approving lower than demanded gas price increase, finance minister Arun Jaitley has said the $5.61 per million British thermal unit (mBtu) rate will ensure explorers make profit but not windfall gain.

The increase in rate, approved by the cabinet committee on economic affairs (CCEA) on Saturday, balances interests of oil and gas explorers and consumers, he said.

“It is a rational decision... Even at this ($5.61) price, the explorers are going to make profit. They won’t have a windfall profit. At the same time, the burden of consumers will be minimal," he said.

Jaitley said the CCEA approved price of $5.61 per mBtu as against $8.4 per mBtu approved by the previous United Progressive Alliance (UPA) government and higher rates demanded by private firms like Reliance Industries Ltd. (RIL) and BP Plc, balances incentives for investment and consumer interest.

“We balanced the decision where there is incentive for investment in the sector and at the same time the consumer is not overburdened," he told ET Now. “With this decision, the explorers may not make a windfall profit, they will make a profit."

Jaitley added that he was not against business.

“Well it is a balancing act. I am not against business, or against big business. I don’t consider profit a bad word. I think it is windfall profit that is a bad word. Therefore, this (gas price hike) ensures profit rather than windfall profit, at the same time this also factors into interest of the aam aadmi."

The National Democratic Alliance (NDA) government after coming to power twice deferred a decision on gas price hike, which was originally due on 1 April, to hold wider consultations. A gas price increase will result in rise in cost of fertilizer production and hike electricity tariff as also CNG (compressed natural gas) price.

Jaitley said the gas price hike decision was “professionally taken."

A committee of secretaries excluded the irrelevant factors in the Rangarajan formula, which was approved by the previous UPA government, and included the relevant. PTI

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