The government today hinted that companies retailing CNG and piped natural gas in metros

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may not pass on the entire impact of the over two-fold hike in natural gas prices to consumers.

Rates of compressed natural gas (CNG) sold to automobiles in Delhi and Mumbai will have to be raised by about Rs 6 per kg, while piped gas for households would have to be hiked by about Rs 4 per cubic metre because of the government's decision to raise input gas prices to Rs 7.5 per cubic metre.

"We sincerely hope that passing on the entire burden (of increased input cost) may not be necessary for companies retailing CNG and PNG to automobiles and households in Delhi and Mumbai," Oil Secretary S Sundareshan told reporters here.

Indraprastha Gas Ltd (IGL) in Delhi and Mahanagar Gas Ltd (MGL) in Mumbai are the only city gas companies in the country that buy government-controlled gas, called APM gas, the price of which was raised yesterday.

"These companies are majority owned by oil PSUs and the government is the largest shareholder in these oil PSUs. So we hope the companies will take a considered view," he said.

Both IGL and MGL have so far remained tight-lipped about passing on the increase in natural gas prices to consumers.

The Cabinet yesterday hiked the price of gas sold to power, fertilizer and city gas projects from Rs 3,200 per thousand cubic metres (USD 1.79 per million British thermal unit) to Rs 6,818 per thousand cubic metres (USD 3.818 per mmBtu). After adding royalty, the price for user industries would be Rs 7,500 per thousand cubic metres (Rs 7.5 per cubic metre) or USD 4.2 per mmBtu, at par with the rate at which Reliance Industries sells gas from its KG basin fields.

He said the decision would come into effect once it is notified in the next few days. It would also lead to a rise in fertilizer production costs and power generation tariffs.

Fertilizer prices will not be increased, as the government subsidises the sector. But the decision would result in the fertiliser subsidy rising by Rs 3,500 crore. "The government stands to gain (in royalty and taxes) an amount larger than this subsidy payout," the Secretary said.

Sundareshan said the increase in power tariffs would be marginal, as only 11 per cent of the total electricity generated in the country was from gas-based power projects and of these, only one-third use APM gas. CNG in Delhi currently costs Rs 21.90 per kg. State-owned ONGC and OIL, which produce APM gas, would gain about Rs 5,000 crore and Rs 700 crore in revenues because of the gas price increase.

State gas utility GAIL India, which has been allowed to charge Rs 200 per thousand cubic metres or 11.2 cents per mmBtu as marketing margin would gain Rs 200 crore in revenues annually, he said.