The government has decided to cap the price of natural gas at $3.86 per million British thermal unit for this year, providing relief to users who thought gas would become dearer.
The Cabinet had last month decided that consumers, other than power and fertiliser companies, would have to pay market-determined prices for natural gas. Officials told Business Standard that the ceiling would be removed next year.
The government has also issued instructions to Oil and Natural Gas Corporation and Gail India Ltd on the new pricing policy. Under the changed policy, ONGC will no longer have to subsidise natural gas bought from joint venture companies.
Gail was making up for shortage of gas supplied under the government's administered price mechanism by buying the non-APM (joint venture) gas.
This gas was being produced from fields given out to companies under the new exploration and licensing policy. Gail compensated for the higher price of non-APM gas by deducting the amount it paid to the ONGC. This practice had now been done away with, officials said.
Power and fertiliser companies will have to pay Rs 3,200 per thousand cubic metres for gas from July 1, instead of Rs 2,850 being paid earlier for gas supplied from nominated fields. This is likely to bring Rs 1,000-1,200 crore (Rs 10-12 billion) to ONGC.
As per the government order, the price of natural gas being supplied to the transport sector as compressed natural gas will now be Rs 3,200, instead of the earlier Rs 2,850. Small-scale industries using less than 50,000 mmscmd (million standard cubic metre a day) will also have to pay Rs 3,200.
Officials said ONGC's burden of subsidising gas for the north-eastern states also stood reduced. The government has allowed ONGC to peg gas at 60 per cent of the new price of Rs 3,200.
It means the company can charge Rs 1,920 instead of Rs 1,700 from the north-eastern states.
The subsidy burden on ONGC, because of cheaper gas for the Northeast, will be about Rs 150 crore (Rs 1.5 billion). The company will not have to bear this from the next year as the Centre will compensate it for the subsidised amount.
New strategy
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The government has issued instructions to Oil and Natural Gas Corporation and Gail India Ltd on the new pricing policy
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Under the changed policy, ONGC will no longer have to subsidise natural gas bought from joint venture companies
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Gail was making up for shortage of gas supplied under the government's administered price mechanism by buying the non-APM gas
- Power companies will have to pay Rs 3,200 per thousand cubic metres for gas from July 1, instead of Rs 2,850 being paid earlier for gas supplied from nominated fields
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