Gas prices linked to global fuel oil rates n Consumers to pay 19% more
The government yesterday initiated phased de-control of natural gas prices by linking it to the international prices of fuel oil, a move which is likely to make gas costlier by 19 per cent.
The consumer price at landfall points is expected to be Rs 2,200 per million cubic metres (MCM) as against the current prices of Rs 1,850 per MCM. The exact price will be notified by the Gas Authority of India Ltd (GAIL). The prices have been revised taking into consideration the recommendations of the T L Sankar Committee, which had suggested a gradual increase in the consumer prices of natural gas, aligning it to the likely import prices of liquefied natural gas (LNG) or natural gas over five years.
The consumer price is being fixed at 55 per cent of the international price of a basket of internationally traded fuel oils. This will be increased to 65 per cent in 1998-99 and, thereafter, to 75 per cent in 1999-2000.
Gas prices will be determined quarterly and will fluctuate with the international prices of fuel oil subject a floor of Rs 2,150 per MCM and a ceiling of Rs 2,850 per MCM which is the target price recommended by the Sankar Committee. The gas price policy will be reviewed after three years with a view to introducing 100 per cent fuel oil parity prices over the fourth and fifth years.
With the implementation of the new pricing policy, the producer price of gas to be paid to the Oil and Natural Gas Corporation (ONGC) will be Rs 1,830 per MCM and will be revised quarterly in line with the revision in the consumer price which is, in turn, linked to international fuel oil prices.
In order to ensure rapid and optimal development of marginal isolated fields, it has been decided to allow the ONGC and Oil India Limited (OIL) to charge market-driven prices for the gas from such fields. As recommended by the Sankar Committee, GAILs transportation charge along the HBJ pipeline has been revised from the current level of Rs 850 per MCM to Rs 1,150 per MCM with immediate effect. The government also decided to continue concessional pricing of gas for the North-East.
Both GAIL and (ONGC) yesterday welcomed the dismantling of natural gas price controls. A buoyant GAIL chairman, C R Prasad said the move would attract investors to its proposed $190 million global depository receipts (GDR) issue. We may hit the market before November to mop up GDR funds. ONGC director Atul Chandra described the decision as very good move.
Continuing with concessional pricing of gas for the North-East, the consumer price will be fixed at 30 per cent, 40 per cent and 45 per cent of the price of a basket of internationally traded fuel oils which will increase the gas price from the present level of Rs 1,000 per MCM to Rs 1,200 per MCM in 1997-98, Rs 1,600 per MCM in 1998-99 and Rs 1,700 per MCM in 1999-2000, respectively.
