No review of decision on gas price hike: Moily

Pricing to be based on Rangarajan formula

No review of decision on gas price hike: Moily

Union Petroleum Minister Veerappa Moily on Thursday said a firm no to reviewing last month’s Cabinet decision on gas pricing.

The minister also put to rest speculation that the Finance Ministry wanted the Petroleum Ministry to consider a cap on gas price as well as ask Reliance Industries to sell its unmet commitments from KG-D6 at current rates of $ 4.2 per million British thermal unit (mmBtu).

“There is no thinking on review of the Cabinet Committee on Economic Affairs (CCEA) decision on gas pricing,” Moily told reporters. The decision is applicable to natural gas produced domestically to all consumers uniformly.

Moily said: “The office memorandum dated July 4 from the Department of Expenditure, Ministry of Finance, has enclosed two editorials of the newspapers and illustrated some of the issues in these editorials. That cannot be taken as objective opinion of the Ministry of Finance and cannot be considered as query raised by the Finance Ministry.”

 The CCEA on June 27 approved pricing of all domestic gas through the Rangarajan formula from April 1, 2014. The price of gas as per the formula is likely to be about $ 8.4 per mmBtu as opposed to $ 4.2 per mmBtu at present.

 Accordingly, the APM gas prices would be revised with effect from April 1, 2014, whereas the price of gas produced from fields, as determined by the production sharing contracts, will be revised as and when they are due for revision as per the contract.

After the price revision, realisations of upstream companies and consequently profitability would increase.

Moily said his ministry had taken the opinion from the Finance Ministry twice and it was incorporated in the CCEA note. The Finance Ministry, in comments, did not raise any issue on capping the price or about RIL being asked to sell gas at the old rate.

 “I don’t think there is another interpretation open to it. It is the CCEA decision taken after due deliberation and I think it has taken a lot of time and deliberations, and once considered view has been taken, we will stick to that,” Moily said.

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