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Election Commission asks government to defer new gas price hike

25 Mar 2014 Evaluate

The revision in natural gas prices is likely to be delayed for few months as the Election Commission asked the government to defer the price hike due to take effect on 1 April, saying that the decision should be left to the government that is formed after the general elections.

Earlier in June, the government had approved the formula under which all domestically produced gas will be priced at an average of the price prevailing at international gas trading hubs and the actual cost of importing liquid gas (LNG). Under the new approved pricing formula, the gas prices will get doubled at $8.40 per million British thermal unit from the current price at $ 4.20 per mbtu and put excessive burden on consumers. Natural gas pricing formula was planned to implement from April 1, 2014 for a period of five years. As per this formula, gas prices will be revised on the quarterly basis and price for each quarter will be calculated based on the 12-month trailing average price with a lag of one quarter.

The new price will be uniformly applicable to all public and private sector producers such as Reliance Industries and ONGC. The increase in gas prices will directly benefit these local producers. Further, the move to raise gas prices is expected to benefit the government by around $2.2 billion incremental revenue by way of higher taxes.

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