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Flexible gas price regime may raise household budgets

If a proposal is approved, gas prices, which have a knock-on effect on a wide range of goods, will change every quarter. Anupama Airy reports. All-pervasive: not all gas!

business Updated: May 28, 2013 02:25 IST
Anupama Airy
Anupama Airy
Hindustan Times

Natural gas, like petrol and diesel, may have a flexible pricing regime soon, which will change the way your home needs are priced. If a proposal is approved, gas prices, which have a knock-on effect on a wide range of goods, will change every quarter.

A May 14 note by the petroleum ministry sent to the Cabinet Committee on Economic Affairs (CCEA) has recommended periodic revisions in the price of domestic natural gas produced from all sources during the current 12th Plan period (from 2012-13 to 2016-17).

According to the pricing mechanism proposed in the note, gas prices are estimated to move up between $6.8 to over $10 per million metric British thermal units (mmBtu) from now on till 2016-17. The current price of domestic gas is $4.2 per mmBtu.

"Gas prices would be notified in advance on a quarterly basis using the data for four quarters, with a lag of one quarter… these policy guidelines shall be applicable during the 12th Five-Year Plan period (from 2012-13 till 2016-17)," the CCEA note said.

Once the proposal is cleared by the Cabinet, gas prices will be revised and notified once every three months. This would clearly mean frequent increases in household bills, as cost of power, piped gas coming into kitchens and auto gas going into your vehicles would go up, thereby increasing your kitchen bills and transportation costs.

The proposed move will also impact fertiliser production and impact the production cost of urea. High fertiliser prices would also result in increased food prices.

From the industry's perspective, higher gas prices would also mean rise in manufacturing costs, making construction materials such as steel, cement costlier.

Over the 12th Five-Year Plan period, a major proportion of growth in demand for gas is likely to come from the power and fertiliser sectors, the note said.

Power sector consumption, currently at 61 million metric standard cubic meter per day (mmscmd) will translate into a demand of 207 mmscmd by 2016-17, while the current fertiliser consumption of 37 mmscmd will result in a demand of 106 mmscmd by 2014-15.

Other sectors, which currently consume 68 mmscmd of gas, will generate a demand of 153 mmscmd by 2016-17. The total demand for natural gas in the country is likely to grow from the current 166 mmscmd to 466 mmscmd in 2016-17.

First Published: May 27, 2013 21:28 IST