APM gas price set to go up, may hit power, fert sectors

Font Size

Print

Feedback

Email

Discuss

Related Articles

Oil recession may get even more crudeIOC to face net loss of 5,800 cr in 2008-09Indian oil imports from Middle East up 11 pc, says...Crude shock: Petrol dearer by Rs 5/ltr

New Delhi, Jan 29: The petroleum ministry has moved a Cabinet note to increase the price of administered price mechanism (APM) gas—the natural gas produced by ONGC and OIL from the fields awarded to them on nomination basis by the government. The price of APM gas was last revised in June 2005.

The producer price for ONGC’s gas would be increased to Rs 3,710 per million standard cubic meter and that of OIL’s gas to Rs 4,150 per mscm from the existing Rs 3,200 per mscm.

While the flip side of the move is that it will have a direct impact on the cost of power generation and fertiliser production, however, on the other hand the impact of this price hike will result in additional revenue generation to both the Central and state governments on account of increase in royalty of gas production, corporate tax, sales tax and dividend.

However, the revised APM gas prices are still far below the weighted average price of non-APM gas at Rs 6,852 per mscm or 185% above the proposed producer price.

Significantly, in line with the recommendations of the Tariff Commission, the ministry has proposed to link further changes in the price of APM gas to the Wholesale Price Index (WPI). “This price (of Rs 3,710 and Rs 4,150) of gas will be changed by Rs 55 per mscm for every 10 points change in the WPI. Changes in the producer price necessitated by change in WPI would be issued by the petroleum ministry,” as per the Cabinet note.

It has also been clarified that all natural gas produced from the nominated gas fields (excluding new fields) will be treated as APM gas. Natural gas produced from new fields will be allowed to be sold at the market price.

For different categories of consumers such as for power and fertiliser units outside north-east, it has been proposed that the prices be fixed at 10% above the producer price—Rs 4,081 per mscm. Consumer price for power and fertiliser units in the north-east have been proposed to be fixed at 60% of the price for general consumers at Rs 2,449.