The government has deferred its plan to raise natural gas prices from January after strong protests from the power and fertiliser ministries, a government official said on Tuesday.
The oil ministry's proposal to decontrol heavily subsidised gas prices was put on hold following concerns that it would make electricity and fertilisers more expensive and hurt the ruling party in crucial provincial elections next year, the officials said.
The government has set up a panel of ministers to study the proposal that would help gas producers and importers of liquefied natural gas but hurt cash-starved power and fertiliser firms, which consume 80 per cent of the natural gas sold in India.
"The petroleum ministry had sought the Cabinet's approval for decontrolling gas prices from January 10 but now the matter will be considered by the group of ministers," the official, who did not want to be named, said.
Prices have been fixed at less than half the international price but the oil ministry wants to liberalise the gas sector to make it more efficient and to make LNG imports competitive.
"The ministry wanted to revise gas prices because producers are not getting a remunerative price and are disinclined to produce more natural gas," he said.
"But the proposed increase will make urea non-competitive vis-a-vis imports and the finance ministry is worried that the fertiliser subsidy would increase," he added.
The power ministry objected to a higher gas price, saying the bankrupt state utilities would not be able to pass on the additional cost of power to their customers.
Most state power utilities are deep in the red because of largescale theft of electricity and heavily subsidised power supply to farmers and households.
Several states including Delhi, Rajasthan and Madhya Pradesh, where elections are due in 2003, also oppose higher gas prices.
But Petronet LNG, a firm promoted by state energy firms, and Shell India, which plans to import LNG in India by 2004, want gas prices to be market driven to make imports more competitive.
The oil ministry says LNG imports are necessary because India produces only 65 million cubic metres of gas a day, less that half the demand of 151 million cubic metres.
The recent discovery of seven trillion cubic feet of gas off India's southeastern coast would meet only a part of the deficit, officials said.
Meanwhile, Petroleum and Natural Gas Minister Ram Naik informed the Rajya Sabha Tuesday that the Government has not taken any decision on gas price revision.
Responding to supplementaries during the Question Hour, he said as per the government decision taken in September 1997, the gas price revision was due.
He said a Group of Ministers, headed by Planning Commission Deputy Chairman K C Pant, has been constituted to consider the policy for fixation of natural gas prices.
The committee, constituted by the government on Monday, has ministers of fertiliser, power, petroleum and commerce and industry as its members, he said.
Naik said an expert committee had been set up to review the pricing of gas supplied to consumers by the Mahanagar Gas Ltd. The commmittee is to submit its report by the end of this month.
Additional inputs: PTI
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