Gas price hike may not apply to fertiliser biz

Gas for fertiliser sector may be available at a cheaper rate even after an increase in gas prices post April. Govt sources say fertiliser ministry is preparing to send a letter to finance ministry suggesting to keep gas prices lower for fertiliser sector as a hike in gas price will increase fertiliser cost and enhance subsidy burden for the government.

The Ministry of Petroleum and Natural Gas had earlier this month notified the new gas pricing policy that moots higher price for domestically produced gas based on the formula recommended by a panel headed by Prime Minister's Economic Advisory Council Chairman C Rangarajan.

 Currently, natural gas produced from various fields in India is sold at prices ranging between $4.2 per mmBtu and $5.73 mmBtu.

 But the fertiliser sector has demanded that the natural gas for them be available maximum at $5 mmbtu. The fertiliser ministry believes that the higher gas prices will eventually result into higher retail price for fertiliser on which the government gives subsidy.

 Fertiliser subsidy is the most debated issue in India as the government is looking to contain the fiscal deficit alongside rolling out a Food Security Bill. Fertilisers, after oil and food, account for the third-biggest share of India’s total subsidy bill.

 On the other hand, fertiliser ministry too faces a cash crunch and has not been able to pay reimbursement amount to the companies. Subsidy bill payments have been delayed by over seven-eight months for phosphatic and potassic fertilisers.

 It is against this background that the fertiliser ministry is preparing to send a letter to finance ministry requesting it to look into the gas price regime for priority sectors such as fertiliser. 

As per the new guidelines, the new formula suggested by the Rangarajan panel will come into affect from April 1, 2014, and the new formula will be applicable for a period of five years.