 "Chidambaram meets PM on coal, gas pricing")
With the contours of a pooling mechanism almost finalised for coal by a group of ministers, a go-ahead from the Cabinet Committee of Economic Affairs would be smoother. However, gas price increase is not only facing heat from political opponents, but is also being opposed by power and fertiliser lobbies.
Chidambaram said a decision on revising natural gas prices was important to revive investment. The petroleum ministry has proposed increasing natural gas prices by at least 60 per cent to $6.7 per million British thermal unit.
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The Planning Commission and the ministry of finance want the price to be even higher, Petroleum Minister M Veerappa Moily told Business Standard. "If you don't explore, you have to import and it is the easiest job. The country will suffer," he said.
On the issue of increase in fertiliser subsidy because of gas price hike, he said there were only two options related to gas. "Either we have to import or explore more. If we want this, we need to create an environment to attract investment. In the last three-four years, nothing has happened. No fresh investment came," said Moily. About 25,000 Mw of gas-based power capacity was idling, he said.
According to government calculations, if gas price is increased by $1, the power sector will bear an additional burden of Rs 10,040 crore at 70 per cent plant load factor for 28,000 Mw. When it comes to fertiliser, every dollar increase in gas price for 32 million tonnes urea production from 2017-18 would be Rs 4,144 crore annually.
Moily said imported gas price was around $15-16, but the domestic gas rate was currently $4.2. "What our ministry has proposed is $6.7. That may not be enough, but at least there will be some clarity in pricing. Investors will be clear about their future."
The government had in April, set up a group of ministers under Chidambaram to work out a mechanism for Coal India Limited (CIL) to supply domestic and imported coal to ensure at least 65 per cent of the annual contracted quantity for power plants that came up post-2009. While price pooling for such supply will not take place, CIL will take up imports for power companies.