Gujarat polls in sight, Centre defers gas price hike further

Petrol and diesel are not the only petroleum products whose price rise has been deferred due to the Gujarat polls.

Petrol and diesel are not the only petroleum products whose price rise has been deferred due to the Gujarat polls. Though finalised, the UPA Government has deferred until next year an increase in consumer prices of natural gas, a fuel most consumed in the state. Though the Petroleum Ministry assured an Empowered Group of Ministers (EGoM) on September 12 that it would soon approach the Cabinet for an “upward revision” of gas sold under the administered pricing mechanism (APM), a Ministry document says that the increase “would be effected from the last quarter of 2007-08”, that is any time after December 2007 when the Gujarat polls are over.

The last price revision was done in June 2006, almost a year after the Government decreed that the Ministry raise the price of APM gas on an ad-hoc basis but in a phased manner to bring them on par with the market price over the next 3-5 years. Going by that timetable, this year’s price rise should have been carried out by July.

According to the document, the Ministry has favoured a price of Rs 4,896 per million standard cubic metres, up from Rs 3,840 per MSCM, for gas sold to general buyers. A similar 27.5 per cent hike has been calculated for customers in North-East India, power and fertiliser units, and small consumers who buy less than 0.5 MSCM per day. “The consumer price of natural gas in the North-East, for power and fertiliser customers would be Rs 2,449 per MSCM and for Court mandated or small-scale consumers would be Rs 2,938 per MSCM,” says a ministry paper. The prevailing prices for these two segments are respectively Rs 1,920 and Rs 2,304 per MSCM.

Story continues below this ad

Petroleum minister Murli Deora told Parliament last month that though global crude oil prices had nearly doubled in the past year, domestic prices of petrol and diesel were being kept at last year’s level on a direction from UPA chairperson Sonia Gandhi. Though the rationale for higher gas prices is to compensate state-run gas producers Oil & Natural Gas Corporation ONGC) and Oil India Ltd (OIL) their high production costs, the flip side is that it would push up fuel costs of power and fertiliser units that would either pass them on to people or seek more subsidies from the Government.

Gujarat is the second largest consumer of gas after Uttar Pradesh. Its industries bought 6.22 million standard cubic metres per day of APM gas during April-September out of the country’s total APM gas sale of 46.29 MSCMD.