Rangarajan for $8 gas, production-linked payments
Sources said the panel has recommended an increase in domestic gas price from $4.2 per million metric British thermal unit (mmBtu) to nearly $8, which may be an acceptable compromise between the interests of producers who bring risk capital, the government that owns natural resources and user industries like power and steel. The fertiliser department, which administers the subsidy on the commodity, last week agreed to the $8 figure. Fertiliser firms get the highest priority in buying gas from domestic producer Reliance Industries that operates the once-prolific D6 block in the Krishna Godavari basin. The sector is not affected by a price increase as the government fully compensates for selling their products at the regulated price and earns a 12% return on investment. A $4 per unit increase in the price of gas will add another R35,000-40,000 crore to the Centre's fertiliser subsidy burden.
If gas price is increased to $8, electricity tariff for the consumer may go up by R1.6 per unit. CNG for automobiles will also become expensive, but not the subsidised LPG for households.
C Rangarajan, chairman of the economic advisory council to the Prime Minister, told FE the committee headed by him that reviewed the two contentious issues of pricing and profit-sharing has given its recommendations.
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