Decision on gas price increase put off for 3 months

Nod to MoU with China for industrial parks; Paddy procurement price up Rs 50 per quintal

A year after the United Progressive Alliance (UPA) government decided to increase the price of domestic gas produce, the new government is seen dithering over taking a call on notifying the new price from July 1. The Cabinet Committee on Economic Affairs (CCEA) on Wednesday deferred a decision by three months, though it did not junk or modify the pricing formula notified in January this year.

"CCEA has decided the issue needs comprehensive discussions. All stakeholders will be consulted and the people's interest will be kept in mind," Petroleum Minister Dharmendra Pradhan told reporters after the CCEA meeting.

Asked if a committee would revisit the pricing formula that raised the price of gas from $4.2 per million British thermal units (mBtu) to $8.8, a senior official said a review mechanism would be worked out later. "The entire issue and the Rangarajan committee report will be considered," said Pradhan.

CABINET DECIDES

GAS PRICING: To hold wide consultations with stakeholders before taking a call on a gas price increase after three months
FORMULA: The petroleum ministry to decide on a mechanism to review the Rangarajan formula
PROCUREMENT PRICE: Cabinet has announced an increase in procurement prices of summer crops like paddy and pulses
MSP VS INFLATION: Law Minister Ravi Shankar Prasad has said minimum support price is not directly linked to inflation
MOU WITH CHINA: The Cabinet has given its in-principle approval to signing of a memorandum of understanding between India and China for setting up of industrial parks

Gas pricing guidelines were notified on January 10 but the implementation had to be deferred as the model code of conduct for the general elections kicked in, Pradhan said.

In another key decision, ahead of Prime Minister Narendra Modi's meeting with Chinese President Xi Jinping on the sidelines of a BRICS (Brazil, Russia, India, China and South Africa) summit next month, the Cabinet gave its in-principle approval to industrial parks to be set up by China. Law and Telecom Minister Ravi Shankar Prasad said the details of the agreement would be made public after the MoU was signed.

The decision on further consultations came a day after the government partially rolled back the railway fare increase announced earlier. Though Prime Minister Narendra Modi had earlier this month indicated some "tough" decisions from the government, Pradhan ruled out any phased increase in prices of cooking gas and kerosene. The government, however, decided to increase the support price of cereals for farmers which is expected to add to the government's subsidy bill, as well as food prices.

On Sunday, Prime Minister Narendra Modi had held a meeting on the price of gas and discussed tweaking the Rangarajan formula linking the local price to the cost of importing liquefied natural gas and rates in the US, UK and Japan.

Reliance Industries, along with its partner BP Plc, has sought an arbitration with the government over the delay in implementing the new rate, which was to be applicable from April 1. On whether a new price would be applicable from retrospective effect, Petroleum Secretary Saurabh Chandra said the status quo would be maintained.

The current price is $4.2 for a million British thermal unit. Oil and Natural Gas Corporation (ONGC), Oil India Ltd (OIL) and Reliance Industries Ltd (RIL) are going to be the major gainers of a price increase. According to industry estimates, every $1 rise in the price of gas will annually add Rs 3,000 crore to net profits of the public-sector undertakings and Rs 2,000 crore to those of RIL, Cairn and other private companies. It will, however, hit the power and fertliser sectors. For every $1 rise in the price of gas, the fertiliser subsidy is expected to rise Rs 3,155 crore and the power sector's losses will increase Rs 10,040 crore a year.

Among other decisions, CCEA on Wednesday accepted recommendations of the Commission for Agriculture Costs and Prices (CACP) for minimum support prices of kharif (summer) crops to be effective from October 1.

The procurement price for common-grade paddy was raised by Rs 50 to Rs 1,360 a quintal. Grade-A paddy will be procured at Rs 1,400 a quintal, against the existing Rs 1,345.

Procurement prices of some pulses were also raised. The minimum support price of arhar was raised by Rs 50 to Rs 4,350 a quintal, moong by Rs 100 to Rs 4,600 a quintal and urad by Rs 50 to Rs 4,350 a quintal.