The government on Thursday hinted that companies retailing compressed natural gas and piped natural gas in the metros may not pass on the entire impact of the over two-fold hike in natural gas prices to the consumers.
Rates of CNG sold to automobiles in Delhi and Mumbai will have to be raised by about Rs 6 per kg, while piped gas for households would have to be hiked by about Rs 4 per cubic metre because of the government's decision to raise input gas prices to Rs 7.5 per cubic metre.
"We sincerely hope that passing on the entire burden (of increased input cost) may not be necessary for companies retailing CNG and PNG to automobiles and households in Delhi and Mumbai," oil secretary S Sundareshan told reporters in New Delhi.
Indraprastha Gas Ltd in Delhi and Mahanagar Gas Ltd in Mumbai are the only city gas companies in the country that buy government-controlled gas, called APM gas, the price of which was raised on Wednesday.
"These companies are majority owned by oil PSUs and the government is the largest shareholder in these oil PSUs. So we hope the companies will take a considered view," he said.
Both IGL and MGL have so far remained tight-lipped about passing on the increase in natural gas prices to consumers.
State-run ONGC and OIL produce 54.32 million cubic metres of gas per day, or about 40 per cent of the total gas produced in the country, from fields given to them on a nomination basis.
This gas is sold at government controlled rates, with about 50 mmscmd allocated to power and fertilizer units and city gas projects at $1.79 per mmBtu and the remainder to other industries at $4.75 per mmBtu.
"ONGC and OIL have been making substantial losses in their gas business. The (current) low prices of gas have discouraged national oil companies from making investment (in raising dwindling output). Therefore, it became essential to increase the price of gas," Sundareshan said.
On top of the $4.2 per mmBtu APM gas price tag, state gas transportation and marketing firm GAIL India would be allowed to charge Rs 200 per thousand cubic metres, or 11.2 cents per mmBtu, as a marketing margin. There would also be taxes, pipeline transportation charges and other levies.
The new price will be for the period up to March 31, 2014, the time till when Reliance Industries has been allowed to charge $4.2 per mmBtu for gas from its KG-D6 fields.
The government controls rates of gas produced by ONGC and OIL from fields given to them on a nomination basis (called APM gas). The APM gas price was last revised in 2005 to Rs 3,200 per thousand cubic metres ($1.79 per mmBtu).
ONGC, in 2008-09, lost Rs 4,745 crore (Rs 47.45 billion) in revenues on selling 17.71 billion cubic metres of gas at the government fixed rate.
The petroleum ministry had previously wanted to raise the gas price in stages to $4.2 per mmBtu. It wanted rates paid to ONGC and OIL to be immediately hiked to Rs 4,142 per thousand cubic metres ($2.32 per mmBtu).
The consumer price at this rate would have been 10 per cent higher at $2.55 per mmBtu. Thereafter, the rates were to be hiked to $4.2 per mmBtu in three more installments.
However, on the insistence of the finance ministry, the oil ministry withdrew the proposal and moved a fresh one seeking to raise the price of the gas under APM to Rs 7,500 per thousand cubic metres, or $4.2 per mmBtu, sources said.
The finance ministry wanted the hike to happen at one go and not in stages, sources said.
