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Petroleum minister hints at LPG subsidy rejig

Weeks after implementation of a contentious gas pricing formula was put off by three months, oil minister Dharmendra Pradhan on Saturday indicated that gas price revision may happen well before October 1.

india Updated: Jul 06, 2014 00:25 IST
Anupama Airy
Anupama Airy
Hindustan Times

The government doesn’t plan to raise cooking gas prices immediately but could move to a graded subsidy system where the poorest get LPG at the cheapest rate, said petroleum minister Dharmendra Pradhan.

“The system could be one where poor get the highest benefit,” Pradhan told HT in an interview Saturday.

Explaining the system where subsidies progressively reduce as one moves up the income scale, Pradhan said, “Those who are slightly better off also get some subsidy. But those who can afford should be ready to pay a higher price.”

The present system of monthly hikes in diesel prices will continue for some time but the minister indicated that it could soon be deregulated. He, however, evaded a question on whether the cap of 12 subsidised cylinders a year will be reduced.

Pradhan also said that the government would rework the controversial natural gas pricing formula.

“Why should we fix our natural gas prices based on benchmarks linked to developed markets such as Japan,” Pradhan said, questioning the formula suggested by a panel headed by former Reserve Bank of India governor C Rangarajan.

“These resources belong to our people. Why are we so worried about what well-head price exists in other countries without worrying about the end-use price prevailing in our country?” he asked.

The government has delayed a decision to implement new natural gas prices that the previous UPA government had fixed. Prices of domestic natural gas would double to $8 a unit from the current $4 a unit, under the UPA government-approved formula.

Reliance Industries Ltd (RIL) along with its foreign partners BP and Niko, which operate India’s largest gas field KG D-6 in Andhra Pradesh, has moved the Supreme Court contesting the delay. “We understand that any businessman---domestic or global--- who has invested in India’s energy sector is here to make money,” Pradhan said.

“But the question is how much should they benefit and whether the interests of the people who own these resources are taken care of or not,” the minister added.

Stating that he was aware that subsidy burden on LPG and kerosene has to be brought down, Pradhan said, “There is a larger mandate assigned by the people of this country on Narendra price rise is not the only solution, there are so many other ways and we have to dig into those options.”

First Published: Jul 05, 2014 20:35 IST