The government has decided to go in for complete deregulation in the natural gas sector in two phases. In the first phase, the government may increase floor and ceiling-level prices by around 50 per cent. A matching increase may be effected in the second phase.
This is being done to stagger the burden on the consumer. Since around 80 per cent of natural gas is consumed by public sector power and fertiliser consumers, "the government sees no point in taking money out of one pocket just to put it in the other," a petroleum ministry official said.
The first increase in natural gas prices might be effected from April 1 while the second hike was expected an year later, the official said.
More From This Section
Earlier, the petroleum ministry had proposed to the Cabinet a hefty 81 per cent increase at the floor level and a 107 per cent increase of ceiling-level price of natural gas. It had proposed to increase the floor-level price of natural gas from Rs 2,150 per million cubic metre (mcm) to Rs 3,900 per mcm.
Similarly, it proposed to increase the ceiling-level price from Rs 2,850 per mcm to Rs 5,900 per mcm. These prices are to be applicable to consumers other than in north-eastern states.
The ministry was of the view the hike had become inevitable with a view to achieving 100 per cent parity with fuel oil prices and to prevent abnormal fluctuations in gas prices. Moreover, the ministry proposed to revise the floor and ceiling-level prices to bring them at par with those applicable to gas purchased from joint-venture gas fields.
The floor and ceiling-level prices for gas purchased from joint-venture gas fields are $2.11 per million metric British thermal unit (mmbtu) and $3.11 per mmbtu, respectively. At the current rupee-dollar parity, the consumer price works out to Rs 3,900 per mcm at floor level and Rs 5,900 per mcm at ceiling level.
The prices of natural gas produced by oil PSUs were last revised in September 1997, with the approval of the Cabinet, effective from October 1, 1997 to March 31, 2000. These prices were linked to the international price of a basket of low sulphur heavy stock (LSHS) fuel oils to achieve 100 per cent parity in fuel oil prices by 2001-2002.
For the first three years, the consumer price of gas was progressively linked to 55 per cent of the international prices of a basket of LSHS fuel oils in 1997-98, to 65 per cent in 1998-99 and 75 per cent in 1999-2000 for consumers other than those in north-eastern states.
For consumers in north-eastern states, the consumer price of gas was linked at 30 per cent in 1997-98, 40 per cent in 1998-99, and 45 per cent in 1999-2000. The consumer price of gas at landfall point is linked to a calorific value of 10,000 kilo calories per cubic metre.