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Natural gas price hike to put consumer budgets under pressure

The doubling of natural gas prices from April 2014 will lead to an increase in power tariffs, cost of CNG and see households shelling out more for piped natural gas used in kitchens.

Mail Today Bureau   New Delhi     Last Updated: June 28, 2013  | 11:48 IST

The government on Thursday gave the go-ahead for doubling the price of natural gas to $8.4 per million British thermal units (mmBtu) from April 1 next year.

The Cabinet Committee on Economic Affairs, headed by Prime Minister Manmohan Singh, approved the oil ministry's proposal to price all domestically produced natural gas according to the formula recommended by the C Rangarajan Committee.

The decision will lead to an increase in power tariffs, cost of CNG and see households shelling out more for piped natural gas used in kitchens. The higher price of natural gas will also push up the cost of producing fertilisers as a result of which the government would end up paying a higher subsidy bill.

The revision in price was staunchly opposed by the power and fertiliser ministries as well as the Left parties, who saw the move as helping Mukesh Ambani-run Reliance Industries Ltd (RIL) , the biggest private sector producer of natural gas.

The Left parties had attacked petroleum minister Veerappa Moily for trying to push through higher gas price even though it was to come into effect from April 2014, when the country would be going to the polls.

According to Moily, the increase in gas price was required to give a higher incentive to oil and gas exploration.

However, the fertliser ministry had pointed out that while the incremental revenue for every $1 rise in natural gas prices would be Rs 706.7 crore, the government would suffer a subsidy loss of Rs 3,155 crore on fertiliser.

The power ministry had said that it would lose Rs 10,040 crore annually.

The new price will apply to public sector companies Oil and Natural Gas Corporation and Oil India which in any case foot a significant chunk of the country's subsidy bill on kerosene, LPG and diesel. RIL will be the main beneficiary in the private sector.

The new price will come into effect from April 1, 2014, just when RIL's KG-D6 formula of $4.2/ mmBtu expires.

In association with Mail Today

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