Gas price revision deferred by 3 months

Gas price revision deferred by 3 months

In a surprise move, the NDA government on Wednesday deferred a decision on revising natural gas prices and said further consultations “with all the stakeholders” were required in the interest of the public.

The previous UPA government had decided to double gas prices to $8.4 per million British thermal units (mbtu) of gas from April 1, but deferred its implementation by three months in view of the general elections. The revision in gas prices would have come into effect from July 1.

On Wednesday, the Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi decided that “comprehensive discussions” were necessary on the issue of domestic natural gas pricing guidelines.

“It was decided that consultations would be held with all stakeholders keeping public interest in mind. Therefore, the CCEA has deferred this issue for a period of three months,” Petroleum and Natural Gas Minister Dharmendra Pradhan told reporters here.

He said the status quo would continue on gas prices. It means that the present price of $4.2 per mbtu would continue till September end. Gas producers Reliance Industries and state-run ONGC had said that the present price was not enough to explore new areas of the country’s gas reserves.

The decision is seen as a setback to gas producers such as Reliance and its partner British Petroleum, who have already slapped arbitration notices on the government for the delay in the revision of gas prices.

Official sources said the Modi-led government was keen to fully focus its energies on its maiden general budget and deal with contentious issues later.

Finance Minister Arun Jaitley said there was a need to review the mechanism for raising gas prices.  The Rangarajan Committee, constituted by the UPA government, had suggested a complex formula to fix the prices of domestically produced gas with provisions for a quarterly review.

Pradhan, who had held three rounds of discussions with Modi since Friday, did not say whether a new expert committee or a ministerial group would be constituted for the review.

Neither Pradhan nor Law Minister Ravi Shankar Prasad, who briefed the media, would say if a new formula altogether was being considered or whether the Rangarajan formula will be amended to bring down the prices to acceptable levels.

“The new government must be given time to take a call on what should be the mechanism (of review),” was Prasad’s refrain.

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