India defers gas price hike decision by three months

By Nidhi Verma and Rajesh Kumar Singh

NEW DELHI (Reuters) - India deferred a decision on Wednesday to raise prices of locally produced gas for next three months, saying the matter requires more discussion.

Gas prices were due to rise from April 1, but were delayed in the build up to a general election that ended in May.

"The whole issue as well as the guidelines (for the price hike) require a comprehensive discussion," Oil Minister Dharmendra Pradhan told reporters after a meeting of the federal cabinet.

"We will have a dialogue with all the stakeholders. There is a need to take care of public interest."

 

Currently the bulk of domestic gas is sold at $4.2/mBtu.

Demand for gas in India far outstrips production, but prices have been kept low for important industries such as fertiliser production and power generation, deterring investment in the sector.

Producers such as Reliance Industries and state-run ONGC want a price hike because the cost of exploring new reserves - many of which are in deep water - is more than the current price, leaving them reluctant to take the risk.

But any increase in prices would be unpopular with consumers as it would drive up inflation.

India is a large importer of energy. Its net energy imports last fiscal year amounted to 6.3 percent of gross domestic product.

Reliance, ONGC and Essar Oil could not immediately respond to requests for comment outside regular business hours.

(Additional reporting by Aman Shah in Mumbai; Editing by Louise Heavens)