Decision on gas price rise deferred till November 15

Domestic gas producers will have to wait for 45 days more to get some clarity on the new gas price, with the government saying on Wednesday that it had deferred the much-awaited decision on new pricing guidelines till November 15. Since it assumed power in May this year, this is the second time the National Democratic Alliance government has postponed its decision on the crucial issue.

“The decision has been extended till November 15. It is part of the decision-making process,” telecom and law minister Ravi Shankar Prasad told reporters after a Cabinet meeting. When asked the reason for the deferment, Prasad said: “I am surprised we are focusing on this when so many other important decisions have been taken today (Wednesday).”

With Wednesday’s announcement, the government has missed its own deadline of deciding on new gas prices by September-end. The delay sought by the government could be due to the coming Assembly elections in Maharashtra and Haryana on October 15, and a lack of agreement between the power, fertiliser and petroleum ministries over the quantum of the gas price hike, sources said.

The deferment dashed the hopes of private-sector player Reliance Industries (RIL), which has even gone for arbitration on the issue. Besides RIL, the other beneficiaries of an increase in gas price would be Cairn India, Oil and Natural Gas Corporation and Oil India.

The previous United Progressive Alliance government had in January 2013 notified the new gas pricing guidelines based on a pricing formula suggested by a panel headed by C Rangarajan, former chairman of the Prime Minister’s Economic Advisory Council. Under this formula, the rates would have doubled to $8.4 per million British thermal units.

The new price was to come into effect beginning April. However, general elections were announced and the Election Commission asked the government to delay the pricing decision till the completion of polls. The new government led by the Bharatiya Janata Party had on June 25 deferred the decision for a further three months, seeking the need for stakeholders’ consultation.

Oil minister Dharmendra Pradhan later told Parliament the new gas price would be announced by the end of September. The government had set up a four-member committee comprising the secretaries of power and fertiliser ministries, expenditure department’s secretary, and the additional secretary in the oil ministry. The panel submitted its recommendation last week.

Experts criticised the delay in announcement of gas prices. “It is shocking such an important economic matter is being treated so lightly,” former ONGC chairman R S Sharma told a news channel.

Analysts estimate every dollar increase in gas price will push urea production cost by Rs 1,370 a tonne, power rates by 45 paise a unit, compressed natural gas prices by Rs 2.81 a kg and piped natural gas prices by Rs 1.89 per standard cubic metre.