The government Saturday raised natural gas price to $5.61 per unit but said Reliance Industries, India’s largest private gas producer, will continue to get current $4.2 rate till it makes up for shortfall in output from KG-D6 block off the Andhra coast.
Higher gas prices could mean costlier CNG, piped cooking gas, fertilizers and possibly electricity, which is likely to be insignificant as only 7% of the nation’s power generation capacity is based on gas.
The cabinet committee on economic affairs modified the C Rangarajan-panel’s formula approved by the previous UPA government, bringing down the increased price to $5.61 from $8.4, finance minister Arun Jaitley said.
The new formula will be effective November 1 and rates will be revised every six months, with the next revision being on April 1.
For RIL’s flagging D1&D3 gas fields in KG-D6 block where output should have been 80 mmscmd but is languishing at less than 8 mmscmd, the cabinet decided the current rates will continue to apply.
Officials clarified that while consumers will pay the revised increased price, however, RIL will get only $4.2 with the difference being deposited in a separate account till RIL legally proves it did not deliberately cut production and output fall was a result of geological reasons as it claims.
RIL spokesperson refused to offer any immediate comment.
Higher gas prices could mean increase in expense of running power stations and fertilizer plants. Every dollar increase in gas price leads to a R1,370 per tonne rise in urea production cost and a 45 paise per unit increase in electricity tariff.
Also, there would be a minimum Rs 2.81 per kg increase in CNG price and a Rs 1.89 per standard cubic metre hike in piped cooking gas.
Gas price increase had been deferred on three occasions previously.
The previous UPA government had in June 2013 approved a price formula suggested by a panel headed by C Rangarajan and re-confirmed it in December 2013 with certain conditions for Reliance Industries’ eastern offshore KG-D6 block.
The formula was to be implemented from April 1, 2014 but the Election Commission asked the then government to defer it till completion of polls.
On June 25, the new BJP-led government deferred it for a further three months to September-end saying the issue required “comprehensive consultations.”