Natural gas prices of ONGC, OIL may go up by 30%

The Tariff Commission has proposed that ONGC be paid Rs3,875 per thousand cubic metres for the gas it produces while Rs4,315 per thousand cubic metres would be paid to OIL. Consumer prices would be 10% higher than these figures

The Indian government may soon raise prices of natural gas produced by state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) by as much as 30%, petroleum secretary S Sundareshan said on Monday, reports PTI.

"I am told by the petroleum minister (Murli Deora) that the issue is in the final stages of decision-making in the government. We expect a decision soon," he told reporters on the sidelines of the 6th Asia Gas Partnership Summit at New Delhi.

Price of gas produced by ONGC and OIL from fields given to them on nomination basis were last revised in 2005. Current rates of Rs3,200 per thousand cubic metres ($1.79 per metric million British thermal unit [mmBtu]) are less than half of the $4.2 per mmBtu price of gas from KG-D6 field of Reliance Industries.

The oil ministry has circulated a Cabinet note for hiking price of gas under administered pricing mechanism (APM) to Rs4,142 per thousand cubic meters ($2.32 per mmBtu).

The price of gas under APM is proposed to be raised in stages to Rs7,500 per thousand cubic metres or $4.2 per mmBtu by 2013.

Mr Sundareshan said that the government was weighing policy options to end differential pricing of natural gas that ranges from under $1 per mmBtu (APM gas) to $5.73 per mmBtu (for gas produced by the BG Group-operated Panna/Mukta and Tapti fields).

"Over the next few months, we will explore further how to make all parts of the country get gas at approximately the same price," Mr Sundareshan said, indicating that prices of gas from different sources may be pooled or averaged out to make it uniform for consumers.

Under pooling of prices, producers will get the price as per the production-sharing contract between them and the government. But consumer prices will be uniform irrespective of the source of gas.

Sources said the note on APM gas price increase was based on the recommendation of the Tariff Commission, which proposed that ONGC be paid Rs3,875 per thousand cubic metres for the gas it produces while Rs4,315 would be paid to OIL. Consumer price would be 10% higher than this.

About 40% of the nation's 140 million standard cubic metres a day of gas output is sold at administered rate. A hike in rates of these is an attempt to reduce distortions in a market with more than a dozen prices.

The government has set $4.2 per mmBtu as the sale price of gas from Reliance Industries' eastern offshore KG-D6 fields, while the gas from the BG Group-operated Panna/Mukta and Tapti fields is sold at $5.73 per mmBtu.

State-run ONGC lost a whopping Rs4,745 crore in revenues on selling 17.71 billion cubic metres of natural gas at a rate below production cost in 2008-09.

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