After raising natural gas prices to $8.4 per mbtu from April 1, 2014 which is twice the current rate, the Finance Ministry has written to Oil Ministry seeking an appropriate action and suggested for putting a cap to limit hike in gas rates. The gas prices can be raised as per the Cabinet Committee on Economic Affairs' (CCEA) approved formula of using imported LNG and international hub rates and thus to limit this hike the suggestion was given.
The letter, from the department of expenditure of the finance ministry said that there must be a ceiling price under the formula to cap the unlimited gains for gas producers in the case of an upswing in global prices. The finance ministry also said that it should examine whether it is possible to ensure that Reliance Industries (RIL) delivers its current supply shortfall at the old price of $4.2 per mBtu and does not get undue benefit of an increased price.
Last week, finance ministry also sent an office memorandum to the Oil Ministry enclosing two media reports regarding the June 27 decision of the CCEA to double rates to $8.4 from April 1, 2014, asking it to examine the issues raised for appropriate action. The CCEA has approved Rangarajan panel formula for pricing of gas and would be applicable for next five years. 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. 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.
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