Tuesday, Oct 21, 2014

‘Need to fix anomalies in Ranga formula before revising rates’

In Goyal's opinion, gas prices in India cannot be fixed based on a formula that includes Japanese imports. In Goyal's opinion, gas prices in India cannot be fixed based on a formula that includes Japanese imports.
Press Trust of India | New Delhi | Posted: June 27, 2014 3:06 pm

Days after the government put off natural gas prices hike by three months, Power & Coal Minister Piyush Goyal said there were anomalies in the proposed formula which needed to be fixed before revising rates.

Goyal, who was part of the Parliamentary Standing Committee on Finance that criticised the Rangarajan formula for pricing of domestic gas, said affordability of power and fertiliser sector – which consume two-third of all gas produced in the country, should be kept in mind.

The Standing Committee, he said, had reported “a number of anomalies” in gas pricing.

The Rangarajan formula calls for pricing at an average cost of importing liquefied natural gas (LNG) into India and rates prevailing at international hubs in the US and UK as well as the price of gas imported into Japan.

In Goyal’s opinion, gas prices in India cannot be fixed based on a formula that includes Japanese imports. “Japan is an importer of gas” and not a gas trading hub, he said.

The previous UPA government had in December approved the Rangarajan formula for pricing of all domestic gas from April 1. But before a new rate could be announced, general elections were called for and the price revision was postponed by a quarter to July 1.

The new NDA government on Wednesday decided that a “comprehensive” assessment was needed on the issue before deciding on rates.

If Rangarajan formula was to be implemented from April 1, gas price would have jumped to USD 8.34 per million British thermal unit from USD 4.2 currently. The formula calls for rates to be revised quarterly and price in July would have been close to USD 8.8.

The new rate would have led to an increase in electricity tariff besides huge jump in fertiliser cost as well as CNG rates in cities like Delhi and Mumbai.

Goyal said the BJP government has been in office for only one month and it is important that “we study the issue in its entirety.”

Power and fertiliser sector which have direct impact on common man, have “certain expectation of quality product at affordable prices,” he said without elaborating.

“These gas plants were not set up with the commitment of pricing or assurance of gas supply but I am not taking that approach because I believe that an investment made in an asset in India is a national asset,” he said.

“I see certain merits (in pricing and availability of gas). It is a clean energy fuel. Putting our heads together I am sure with different aspects of the gas plants considered, we will be able to find out the solution,” he added.

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