Decision to hike gas price put off by three months

Tags: News
The Union government has deferred a decision on the proposed doubling of natural gas price to $8.4 per mBtu for three months.

The cabinet committee on economic affairs (CCEA) headed by prime minister Narendra Modi decided on Wednesday to hold extensive consultations with all stakeholders before taking a firm view on the subject. Cooking gas and kerosene prices will also stay untouched.

The domestic gas pricing norms notified on January 10 and deferred due to the model code of conduct will continue to be kept in abeyance. In effect, the government will comprehensively review the recommendations of the C Rangarajan committee on gas price revision, an official privy to the cabinet decision told this newspaper.

Financial Chronicle had reported on Wednesday that a decision on gas price revision would be deferred till after the budget is presented on July 10. The ministers for power and fertilisers had reservations about revising gas price in order to protect end consumers.

Petroleum minister Dharmendra Pradhan told reporters after the CEEA meeting that the government felt there was a need for comprehensive consultations on the proposed gas price hike.

Law minister Ravi Shankar Prasad said that the government needed at least three months to take a call on the matter.

Another official told Financial Chronicle that the cabinet committee on economic affairs decision deferring a price revision would also give the government breathing time to tackle the current slowdown, restore industry’s confidence to resume investments and balance the centre’s fragile finances.

Besides gas producers and state-owned oil refiners, the government will also seek inputs from downstream consumers, including fertiliser, steel and power sectors on the proposed gas price hike.

It would also consult prominent citizens who had challenged the United Progressive Alliance (UPA) government’s decision on gas price revision.

Over 25 prominent citizens had moved the Delhi High Court seeking its intervention in keeping the gas price hike in abeyance.

The official quoted earlier said the centre might also seek the views of state governments, respecting prime minister Narendra Modi’s commitment to ‘cooperative federalism’.

Speculation was rife at the start of the week about a possible hike in gas price to $6 from $4.2 per mBtu, excluding local taxes, transportation charges and marketing margins.

The revised price of $6 per mBtu being touted in the media is much lower than the $8.4 per mBtu recommended by the Rangarajan panel.

Every dollar increase in gas price will lead to power costs going up by 45 paise per kilowatt hour; compressed natural gas would become expensive by Rs 2.81 per kilo (in Delhi); and piped cooking gas ould be dearer by Rs 1.89 per standard cubic metre.

Power minister Piyush Goel met Narendra Modi a day ahead of Wednesday’s cabinet committee on economic affairs meeting, expressing “difficulty in hiking electricity rates” given peaking shortages, extended summer, deficient monsoon and the serious impact on corporate consumers already strained due to the economic slowdown.

Fertilisers minister Ananth Kumar too had already ruled out any hike in urea prices. Further, an increase in gas price would translate into a higher subsidy burden that the government was not willing to take on at this point.

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