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Govt approves hike in natural gas price to $8.4 per mbtu

28 Jun 2013 Evaluate

Delivering a potential boost to the revenue of gas producers, the government has approved doubling of natural gas prices from the present $4.2 per million British thermal unit (mbtu) to $8.4 per mbtu from April 1, 2014. It is the first revision in gas prices in 3 years and will likely result in rise in power tariffs and fertilizer cost and will make CNG transportation more expensive. However, the price will still be lower than that of imported natural gas, which costs around $14.17 per mbtu.

The Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Manmohan Singh approved Rangarajan panel formula for pricing of gas and would be applicable for next five years. As per the Rangarajan formula, long-term and spot liquid gas (LNG) import contracts as well as international trading benchmarks will be used to arrive at a competitive price for India. The natural gas prices will be revised on the quarterly basis and for the April-June quarter of 2014, it comes to $8.4 per mbtu.

Further, the new price will be uniformly applicable to all public and private sector producers alike. The increase in gas prices will directly benefit these local producers. Earlier, Oil minister M V Moily said that the revision in rates was a contractual requirement which will help remove policy uncertainties and spur investments, citing that the current rate of $4.2 per mbtu is uneconomical to produce gas from deep-sea fields.

 

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