Government hikes gas price for ONGC and Oil India to $4.20 per mmBtu: report

In a move that would bring the price of gas produced by state-owned Oil and Natural Gas Corp (ONGC) and Oil India at par with Reliance's sale price, the government has more than doubled the price of natural gas produced by the state run firms, according to agency reports.

The cabinet today approved an oil ministry proposal to hike the rate of gas sold to power and fertiliser firms from $1.79 per million British thermal unit to $4.20, the report cited sources as saying.

The two state companies will get $3.818 per mmBtu for the gas they produce from fields they get on nomination basis. The companies will add 10 per cent royalty and the fuel will cost $4.20 per mmBtu to consumers.

In addition to the $4.20 per mmBtu, state gas transportation and marketing firm GAIL India would be allowed to charge 11.2 cents towards marketing margin. Further, there would be the taxes and other levies and also pipeline transportation charges, the report says.

Though the state-run firms would be able to break even in gas business with the move, according to analysts, it would result in hike in electricity generation tariff and fertiliser production cost.

However, since the fuel cost in power and fertiliser bussiness is pass-through (wherein companies pass on the cost to consumers), it would not impact any of the companies that buy ONGC gas, according to analysts.