31 Jan 15 1708hrs ISTFull site


Power tariffs, CNG, PNG prices may rise

Jan 24, 2013, 12.21AM IST TNN[ Sanjay Dutta ]

NEW DELHI: Power tariffs could soon go up throughout the country and public transport fares as well as the cost of piped gas in cities with CNG service could head north if the government accepts an oil ministry proposal to double the price of domestic gas price.

The ministry has suggested the government accepts the gas pricing formula suggested by a panel under Prime Minister's Economic Advisory Council (PMEAC) chief C Rangarajan. If this formula is accepted, domestic gas would cost $8-$8.5 per unit against $4.20 at present. This would directly push up the tariff of electricity produced from gas-fired plants by about Rs 1.50-Rs 2 per unit. Gas-fired plants account for 10% of the country's total generation capacity and 5% in terms of generation.

So in a scenario where cheaper thermal power is pooled with costlier electricity from gas-fired plants, doubling of domestic gas prices would mean an increase of 20 paise a unit in terms of capacity and 10 paise in terms of generation. Since domestic gas makes up a fair chunk of CNG and PNG services, their costs too would go up. This in turn would mean higher public transport fares in cities like Delhi.

Rangarajan himself had on January 2 said the price of end-products such as power and fertilizers should be reviewed in tandem with reforms in the pricing of natural gas. "There is a need for taking a fresh look at the price of end-products. The subsidy bill will not go down if the cost of your raw material rises and you do not review your end-product...it is the same case for everything be it diesel..." Rangarajan said explaining the report for a new oil and gas production contract regime prepared by the panel under him. On letting the market decide on the price of gas it wants to use, the former RBI governor had said the market was yet to develop in India since there was deficit in domestic supplies.

The oil ministry has suggested the government to accept the Rangarajan panel's suggestion to benchmark domestic gas price to an average of international hub prices and cost of imported liquid gas instead of allowing market forces to decide the price.

According to the proposal, the new pricing formula would apply to all forms of natural gas - conventional, shale and coal-bed methane. Also, the price determined shall be applicable to all consuming sectors uniformly.

According to the provisions in the proposal, if accepted by the government, state-run producers Oil and Natural Gas Corporation and Oil India Ltd would be allowed to charge the new price in the current year itself.

But Reliance Industries Ltd (RIL) would have to wait till April 2014 since the government had in 2007 set the price for its gas for five years from start of production. The new formula may also not apply to BG Group-operated Panna/Mukta and Tapti fields in the western offshore as the current rates of $5.57-$5.73 per unit are derived from a pre-defined formula detailed in the field's contract. However, Cairn India's eastern offshore Ravva gas, priced at $3.5-$4.3 per unit, may be revised as per the committee recommendations.


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