Column : Can’t do gas pricing in a vacuum

Power companies who have set up plants under the competitive bidding route are the worst affected. Without the facility of a ‘pass-through’, they have to absorb entire increase in price. Their plight is like ‘babies born sick’.

Considering the criticality of fertiliser and power to the economy, the government assigns them top priority in allocation of gas. It even controls prices of their end-products and heavily subsidises their sales using the taxpayer money.

Why should then a formula be adopted that results in ‘doubling’ of gas price playing havoc with these sectors? Yet, if it cannot be avoided, then the government needs to re-work its ideas regarding control and subsidy on fertiliser/power.

Having a market-based mechanism for the pricing of gas—that would result in ever-escalating cost to fertilisers and power on one hand and controlling prices/tariff of latter at low level on the other—is inherently unsustainable.

The issue is relevant to pricing of all sources of energy, not just gas. Prime Minister Manmohan Singh states that “for development to be sustainable and inclusive, domestic prices should be aligned to international cost”.

Based on the recommendations of Dr Kelkar, the government is reportedly working on removing subsidy on diesel by next year; on LPG 25% in current year and 75% in the next two years and by one-third on kerosene in 2014-15.

Whether

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