Secretaries panel recommends 50% hike in gas price: report

A four-member committee of secretaries, constituted by the centre to suggest a new pricing mechanism for natural gas produced in the country, is understood to have recommended a price that is half way between the existing price of $4.2 per million British thermal units and the $8.4 per mmBtu recommended by the Rangarajan Panel under the UPA government in 2012 (See: Rangarajan formula could almost double natural gas price).

While the contents of the report are still under wraps, petroleum ministry officials are reported to have hinted that the new price could be 50 per cent higher than the existing rate, reports quoting official sources said.

Consumers may welcome a reduction in the recommended price of natural gas from $8.4 per mmBtu to around $6.2 per mmBtu while producers would welcome any increase in the price of gas.

Gas producers, including Reliance Industries and state-run ONGC, have been demanding market-linked rates for natural gas while consumers in the power and fertiliser sectors have said they cannot afford any rate higher than $5 per mmBtu.

The panel has been constituted with the specific intention of finding a balanced price that would serve consumers' interest while incentivising production by making marginal and deep-sea fields economically viable.

The petroleum ministry will study the report before a cabinet note on the new pricing formula is moved.

The government had last month constituted a committee comprising the secretaries of power, fertilisers and expenditure, with the additional secretary in the petroleum ministry as its member secretary, to review the gas pricing formula notified in January that doubled the gas price to $8.4 per million British thermal unit (Govt sets up four-member panel to review gas pricing mechanism).

The panel has tried to strike a balance between the demands for a market linked rate by gas producers to make marginal and deep-sea fields economically viable, and consumers in the power and fertiliser sector, who have said they cannot afford any rate higher than $5.

Although the government had earlier said the new gas price would be announced by September-end, with elections to Maharashta and Haryana assemblies due next month, the centre is unlikely to announce any increase in gas prices until at least the elections are over.

Even a $2 per mmBtu increase will lead to a hike in CNG prices for automobiles and domestic consumers.