The government’s decision to double the price of natural gas, hailed as a bold reformist move by analysts and greeted by cheering currency and stock markets, came after an intense debate among ministers, with finance minister P Chidambaram articulating the need to incentivise investment.
Top government sources said that at least a couple of ministers raised concerns during Thursday’s meeting of the Cabinet Committee of Economic Affairs (CCAE) about the inflationary impact of the move to double natural gas prices to $ 8.4 per unit under a new formula.
It was suggested by a panel headed by Prime Minister’s economic advisor C Rangarajan from April 1, 2014.
“There were concerns that it will likely push up power and fertilisers, which can potentially have a cascading impact on the prices of food items, power tariffs to public transport fares,” a source, who did not wish to be identified, told HT.
Chidambaram and petroleum minister Veerappa Moily, however, argued that the move will help investors in the energy sector as local prices have moved closer to global market levels.
Besides, the finance minister said at the meeting that the government is sensitive to the fact that power and fertiliser prices must be sustainable too.