Stoutly defending the move to raise price from current USD 4.2 per million British thermal unit, Chidambaram said investment in domestic oil and gas hunt had dramatically fallen in absence of remunerative prices, resulting in sharp dip in production that was being made up through costlier imports.
After deliberating on the proposal for over one-and-half hours, the Cabinet Committee on Economic Affairs (CCEA) last evening approved pricing of all domestically produced natural gas at an average of the cost of imported liquid gas (LNG) on long-term contract and international gas benchmarks.
The increase in gas price was opposed by user ministries of power and fertiliser as it would lead to cost of generating electricity spiking to Rs 6.40 per unit from Rs 2.93 and nearly Rs 9,000 crore per annum rise in cost of urea output.
"What is the price at which it should be supplied to a power plant, to a fertiliser plant in order to make power affordable, fertiliser affordable... That can still be decided between now and April 1," he said.
Stating that the government was conscious of keeping power and fertiliser prices low, he said, "It could be tweaking prices or it could be bearing additional subsidy. There are various methods but at the moment we are not addressing those issues.