A four-member panel of secretaries appointed by the government has submitted the much awaited report on a new gas pricing mechanism, which prescribes lower rate than the price approved by the previous United Progressive Alliance (UPA) government. Though contents of the report have not been disclosed, report suggests that price increase may be around 50%.
Most of the domestically produced gas is currently sold at a price of $4.2 per million metric Btu. However, even an increase of $2 per mmBtu, will lead to a hike in CNG (Compressed Natural Gas) price for automobiles, could be politically challenging decision during the time of state polls. The government had earlier decided to announce the gas price decision by September end, but the same is expected to be put on hold until completion of assembly polls in Maharashtra and Haryana in mid-October.
Originally, the Rangarajan formula, approved by the UPA government, was to be implemented from April 1 but was deferred by three months as general elections were announced. The NDA government on June 25 postponed its implementation by a further three months pending a comprehensive review. It was only in August, the government constituted a committee comprising of secretaries of power, fertilizer and expenditure with additional secretary in the oil ministry as its member secretary, to make amendments to a formula notified in January that doubled the gas price to $8.4 per million British thermal units (Btu).
The four member panel has reportedly managed to strike a balance between demands for a market linked rate by gas producers to make marginal and deep-sea fields economically viable, and consumers in the power and fertiliser sector, who have said they cannot afford any rate higher than $5.
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