Weeks after Cabinet Committee on Economic Affairs (CCEA) decided to put off the implementation of a contentious gas pricing formula by three months, Oil Minister Dharmendra Pradhan hinted that gas price revision could take place before October 1, 2014. The new government, previously while maintaining status quo on price of natural gas for 3 months, sought more time for holding comprehensive discussion with stakeholders on the issue.
Nevertheless, if the formula based on Rangarajan panel recommendations would have been implemented, the prices of gas, used mainly for power and fertilizer production, would have more than doubled to around $8.8 per million British thermal unit (mBtu). Every US dollar increase in gas price will lead to an Rs 1,370 per tonne rise in urea production cost and 45 paise per unit increase in electricity tariff. This would have also led to a minimum Rs 2.81 per kg increase in CNG price and a Rs 1.89 per standard cubic metre hike in piped cooking gas.
However, Pradhan underscored that Rangarajan formula had certain anomalies, which the new government will look to fix keeping the interest of end-consumers in mind. He unveiled that implementation of Rangarajan’s formula would have upped the power cost by Rs 2 per unit and CNG rates by over 12.6 per kg considering a $4.5 dollar increase in gas rates. But, the oil minister ruled out the chances of forming a new expert committee for the purpose of review.
