Hike in CNG price could see ONGC, Oil India revenues soar

Tariffs of public transport undertakings running on CNG (compressed natural gas) in cities such as Delhi and Mumbai as well as power tariffs are set to rise if the government approves an oil ministry proposal to raise the price of gas under government control by as much as 33 per cent.

According to analysts since gas under government control is used as fuel in most gas-fired power stations and CNG services their costs will rise in proportion. Under the present norms, power producers are allowed to pass on the fuel cost to consumers, but the price escalation for city transport could be to some extent absorbed by service providers such as IGL in Delhi and MGL in Mumbai.

According to official sources the proposal presently under consideration envisages the hike in price of controlled gas from Rs3,200 per thousand cubic metres to Rs4,250 per thousand cubic metres by 2013 in increments.

The cental government controls the price of gas from fields given to state-run explorers without bidding but gas from joint venture fields and the quantity bought and marketed by GAIL is market-driven costing $4.3 to $5.65 per unit. Another source is through imports and finally the Andhra offshore fields of Reliance Industries.

A ministerial panel has set $4.2 per unit as the price for RIL gas which the Planning Commisssion want to set as a benchmark for gas pricing from all domestic sources

The increases in the price of controlled gas would also be inline with a 2005 Tariff Commision recommendation. It was in 2005 that the price of gas was last revised.