Gas price revision will help augment availability: EY

Apr 25 2014, 18:52 IST
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SummaryThis will improve India's energy security and increase availability of gas for its key gas-consuming industries," it said.

India may almost double to USD 8.3 per million British thermal units when the Rangarajan formula is implemented.

Khanna said the government needs to effectively address concerns related to the increased price burden for consumers for the overall success of the policy.

The policy will also increase gas availability for key consuming industries, including power and fertilisers, which may account for about 68 per cent of total demand in FY17.

"However, these sectors are price sensitive and may find it difficult to absorb the increased natural gas prices. Gas-based power plants, which are currently non-functional (6,000 MW of commissioned and 1,000 MW of un-commissioned) due to unavailability of gas, could be brought on stream," the EY report said.

However, generation costs are expected to increase, rendering plants affordable only for peak load purposes.

In the case of the highly subsidised fertiliser sector, production costs would rise as a result of the revised prices, leading to an increase in the government's subsidy burden.

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