New Delhi, June 28 (IANS) A day after approving a sharp increase in gas prices, the government Friday said it may subsidise the price for power and fertilizer producers.
Addressing a media conference here, Finance Minister P. Chidambaram said gas prices for power and fertilizer producers could be “tweaked” in order to keep their products affordable for the common people.
“The prices power and fertilizer companies will pay for gas are not being fixed now. What is the price at which it should be supplied to a power plant, to a fertiliser plant, in order to make power affordable, fertiliser affordable, that can be decided between now and April 1, 2014,” Chidambaram said.
The finance minister said the government would take steps to keep power and fertilizer prices affordable.
The Cabinet Committee on Economic Affairs chaired by Prime Minister Manmohan Singh Thursday approved a proposal to hike gas price for the first time in three years.
Price of natural gas will be doubled to $8.4 million metric British Thermal units (mmbtu) from the present $4.2 mbtu. The price rise is based on the recommendations of a committee headed by C. Rangarajan, chairman of the Prime Minister’s economic advisory council.
Chidambaram said the government was forced to hike the prices due to low domestic gas output and difficult macroeconomic situation.
“Decline in domestic production is resulting in rise in import of LNG. We have to produce more gas,” he said.
Chidambaram said due to decline in domestic output and rising consumption, oil import bill was becoming unsustainable.
The finance minister emphasised the need for creating an environment conducive to promote investments in boosting domestic gas production.
He said high gas price would help attract investments in the sector.
“The gas pricing will promote investment in the sector and there is no reason to assume that prices will always increase,” he said.
Chidambaram emphasised that the government has not taken the decisions under pressure from the private sector.
“We are not being influenced by anyone… We are influenced by the economic reality to produce more gas,” he said.
Planning Commission member Kirit Parikh said the hike in gas prices would attract significant investment over the years.
India Inc hailed the government’s decision. FICCI president Naina Lal Kidwai said the revision in natural gas price would “bring in the much required technology and risk capital from foreign majors to tap vast unexplored resources in the deep and ultra deep water frontier basins”.
“This also has the potential to usher in the much needed gas revolution in India with an increased share in our energy basket in line with that of developing countries,” Kidwai said.
India Ratings and Research said the hike in the gas price by the centre will hike the fuel cost per unit for natural gas based power generation by 56 percent to Rs.3.41/kwh.
The rating agency in a report said if the gas prices were to be increased to $6.775/mmbtu from the current $4.2 mmbtu the fuel cost per unit for natural gas based power generation will increase by 56 percent to Rs.3.41.
“This is likely to manifest itself as an increase of nine paisa/kwh on the total Indian power generation of 912 billion kwh, leading to an additional burden of Rs.78 billion towards gas cost on the gas-based power generation of 65 billion kwh,” India Ratings said.
