The cabinet Committee on Economic Affairs (CCEA) is likely to rise the natural gas prices by around 60 per cent to $6.775 per million British thermal unit (mbtu) as against the present rate of $4.2 per mbtu for all domestically produced natural gas, which is expected to impact the power and fertilizer sectors hard.
Meanwhile, the proposed price $6.775 mbtu is lower than the $8 to $8.5 mbtu suggested by the Rangarajan panel, which had suggested pricing domestic gas at an average of rates at three key international hubs -The U.S. Henry Hub, National Balancing Point of the U.K. Further, CCEA draft also states that the natural gas prices will be revised on the quarterly basis and for the April-June quarter, it comes to $6.775 per mbtu.
The new gas prices rates apply to the public sector companies. However, the suggestion of the power ministry was rejected by the Petroleum Ministry, which stated that gas price should not be more than $5 and rates should not be hiked for gas produced by state-owned firms like the Oil and Natural Gas Corporation Limited.
Earlier, oil minister M V Moily said that the revision in rates was a contractual requirement that will help remove policy uncertainty and spur investments citing that the current rate of $4.2 per mbtu uneconomical to produce gas from deep-sea fields.
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