The row over the proposed increase in natural gas prices is set to flare up because the petroleum ministry has admitted that the producer price in the new regime starting April 2014 would be at least $8.55 per million British thermal units and not $6.77 per mBtu as indicated earlier.
The latter figure,a 61 per cent jump from the current $4.2 per mBtu paid to gas producers,has attracted sharp criticism from ministries of finance,fertiliser and power.
Tucked away in the annexure of the proposal for the Cabinet Committee on Economic Affairs is petroleum ministrys acceptance that the ex-field price would be at least $8.55 after including the high-priced Australian Gorgon LNG contracted by GAIL India and the annual increase in Qatar LNG sourced by Petronet LNG Ltd.
The computation of average producers netback for Indian imports after inclusion of both Gorgon and Qatar LNG is $10.32 per mBtu while keeping other prices and quantity static. Thus,finally computed,average price comes to $8.55 per mBtu, the petroleum ministry has stated.
The price could be higher if global prices at the LNG hubs in the UK,US and Japan were to rise,it stated.
The new pricing regime covering all gas forms is proposed to come into effect from April 2014 and is to be computed by averaging the previous quarters traded prices at global hubs and a combine of Indian imports,all of which are in the expensive LNG form.
The power ministry had contested that the $6.77 indicated by petroleum ministry was on a very conservative philosophy and not the true representation of the gas price beyond April 2014 when the revised gas price would be implemented.
Rather,the price will be higher and likely to increase further on each quarter, it argued,claiming that new gas-based power projects would become unviable at any price above $5 per mBtu.
Ministry officials say the final price to the consumers would be higher by another $1.5 per mBtu on including the marketing margins,transportation charges and the state taxes levied on sale of gas.
The ministries of finance,fertiliser and power oppose the formula enunciated by C Rangarajan on the ground that it would levy more burden on the citizen and the exchequer.
The department of expenditure has argued against linking the price to that of global hubs irrelevant to India.