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Govt to consider all views on gas price hike: FM

June 13, 2013 17:58 IST

CalculationsAmid row over a proposal to raise natural gas price, Finance Minister P Chidambaram said the government will take a decision on the issue keeping ‘larger interest’ in mind.

The Oil Ministry has proposed raising natural gas prices by at least 60 per cent, a move that will result in rise in urea as well as power costs.

"All views will be considered and the government will take a decision. My intention is that the government must decide on these matters," Chidambaram told reporters in New Delhi.

The Oil Ministry wants adoption of a pricing formula suggested by Prime Minister's economic advisor C Rangarajan with minor tweaking to raise domestic prices to $6.775 per million British thermal unit in the immediately from current $4.2.

"The papers are ready and they will come before the Cabinet. . . Decisions will be taken taking the larger interest in mind," Chidambaram said, adding that a decision on revising natural gas prices was important to revive investment.

"It is important to revive investment," he said.

The Oil Ministry had in March moved a draft proposal for the consideration of an Empowered Group of Ministers, headed by Defence Minister A K Antony, for revising prices of gas produced by state-owned firms as well as private sector Reliance Industries as per the formula suggested by the Rangarajan


The Cabinet Secretariat returned the proposal saying that the new pricing formula, which would have led to prices going up from current $4.2 per million British thermal unit to about $8.8, was not covered under the EGoM's terms of reference.

The ministry then moved the same proposal for the consideration of the Cabinet Committee on Economic Affairs with minor modifications.

However, the Prime Minister's Office sent back the note saying views of the ministries concerned on the changes made since circulation of the EGoM note, need to be sought.

Sources said the Ministry had not sought comments from any of the ministries concerned on the CCEA note that had modified the earlier proposal so that the immediate gas price increase came to $6.775 per million British thermal unit. In the CCEA note it had attached the comments that ministries like Finance, Power and Fertiliser had given on the EGoM note.

Fresh comments of ministries of Finance, Power, Fertiliser, Law, Heavy Industries, Steel and Department of Chemicals and Petrochemicals have been sought.

The hike in natural gas price by $1 would result in Rs 3,155 crore (Rs 31.55 billion) per annum hit on fertiliser plants for producing 23 million tonnes of urea this fiscal and Rs 4,144 crore (Rs 41.44 billion) a year for 32 million tonnes of urea production from 2017-18.

The impact of every dollar hike in gas price would be about Rs 10,040 crore (Rs 100.4 billion) per annum on the power sector.

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