Govt hikes CNG price by 20 per cent

The Cabinet at its meeting chaired by the prime minister approved the proposal of the Petroleum Ministry seeking revision of the APM price of natural gas from the present level of Rs 3,200 per thousand cubic metres ($1.79 per million British thermal unit— mmBtu) to Rs 6818 ($4.20 per mmBtu).

With this the government virtually allowed ONGC and OIL to sell gas to bulk gas users in the fertiliser and power sector at the rate charged by the private gas producers like the RIL.
“On top of this new rate of $4.2 per mmbTu state owned gas transportation and marketing firm GAIL will be allowed to charge 11.2 per cent as marketing margin. Over and above this there will be the taxes and other levies,” said joint secretary in the Petroleum Ministry Aprub Chandra.

Though the hike in APM price of natural gas would result in rise in electricity generation cost of gas-based power plants as well as fertiliser production cost, there will be a minimum impact on the retail price of fertiliser and power. However, this upward revision of the APM prices of the natural gas would help the state-owned oil and exploration firms to make up for losses being incurred by them by selling gas much below cost price.
Although the Power and Fertiliser Ministries have been opposing any hike in the APM gas price, the Petroleum Ministry had been consistently pushing forward the case. The ministry’s argument was that the present rates were unviable and would not incentivise ONGC and OIL to make further investments in exploration of gas assets.

The Petroleum Ministry has been pressing for uniformity in the gas prices to end differential pricing of natural gas that ranged from under $2 to $5.73  per mmBtu for gas produced by BG Group-operated Panna/Mukta and Tapti fields. The RIL has been charging $4.22  per mmBtu for the gas it produced in the KG basin.

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