Bid to hike CNG price may raise transport cost

Public transport running on CNG (compressed natural gas) in cities such as Delhi and Mumbai as well as power is set to get costlier if the government approves an oil ministry proposal to raise the price of gas under government control by as much as 33%. Since gas under government control fuels most gas-fired power generation and CNG services, their costs will rise proportionately. Present norms allow power producers to pass on the fuel cost to consumers. The hike in city transport, however, could be moderated by the service providers such as IGL in Delhi and MGL in Mumbai who could absorb part of the increase. Official sources said the proposal, being prepared for consideration of the cabinet, envisages raising the price of controlled gas from Rs 3,200 per thousand cubic metres ($1.8 per unit) to Rs 4,250 per thousand cubic metres ($2.4 per mBtu) in the first round. Subsequently, it is to be raised to Rs 7,500 per thousand cubic metres ($4.2 per unit) by 2013 in stages. Government controls the price of gas from fields given to state-run explorers without bidding. Gas from joint venture fields and the quantity bought and marketed by GAIL is market-driven and costs between $4.3 and $5.65 per unit. Next is imported LNG and finally gas from Andhra offshore field of Reliance Industries Ltd. A ministerial panel had set $4.2 per unit as the price for RIL gas and the Planning Commission wants this to be the benchmark for pricing gas from all domestic sources. The increase in the price of controlled gas is also in line with a 2005 Tariffs Commission recommendation. Prices were last revised in 2005. State explorers ONGC and Oil India will be the main beneficiaries. ONGC alone could mop up an additional Rs 2,000 crore per year. Producer price for ONGC is proposed at Rs 3,870 per thousand cubic metres from Rs 3,200. The consumer price would be 10% higher. The government too will garner Rs 750 crore more by way of taxes and royalty in the current year. This would rise to Rs 4,500 crore in 2013 when prices are brought at par with RIL's price. Sources said consumer price for power and fertilizer units outside north-east would be fixed at 10% above the producer price, while for the plants in that region it would be 60% of the price. Consumer price for transport and small consumers outside north-east may be fixed at 20% above the price for power and fertilizer sectors.

Nitika

PGDM-3rd sem

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