The Ministry of Petroleum and Natural Gas on Friday issued a notification for implementation of a new pricing guidelines for all domestically produced natural gas effective from November 1.
"The gas price, determined, under these guidelines would be applicable to all gas produced from nomination fields given to ONGC and Oil India, New Exploration and Licensing Policy (NELP) blocks, such pre-NELP blocks where, the Production Sharing Contract (PSC) provides for government approval of gas prices and coal-bed methane (CBM) block," the notification said.
In a separate order, the ministry's pricing arm said: "The price of domestic natural gas for the period November 1, 2014 to March 31, 2015 is given hereunder: USD 5.05 per million British thermal unit on Gross Calorific Value (GCV) basis."
This price translates into a price of USD 5.61 per mmBtu on Net Calorific Value (NCV) basis, the same basis on which the previous rate of USD 4.2 per mmBtu was decided.
The heat generated by burning of fuel is measured in calorific value basis.
The price hike led to steep increase in compressed natural gas (CNG) rates in Maharashtra and Gujarat.
Mahanagar Gas Ltd, which retails CNG and piped cooking gas in Mumbai, hiked CNG prices by Rs 4.50 per kg to Rs 43.45. Similarly, it also raised tariff for piped natural gas (PNG) supplied to households for cooking purposes by Rs 2.49 to Rs 26.58 per cubic meters.
In Ahmedabad, state government-owned GSPC Gas, Adani Gas and Sabarmati Gas hiked CNG prices by up to Rs 4 per kg to Rs 48.50 per kg, Rs 48.20 a kg and Rs 48.09 per kg respectively.
Gujarat Gas hiked prices by Rs 1.80 per kg to Rs 48.50.
Adani Gas is also planning to raise rates by Rs 3 per kg for CNG it retails in Faridabad, a city that borders national capital.
However, Indraprastha Gas Ltd, the sole retailer of CNG and PNG in the national capital, decided not to raise rates despite input cost going up.
"In spite of revision in domestic gas prices announced by the government with effect from November 1, 2014, IGL has decided not to revise the retail price of CNG and domestic PNG in the interest of its consumers in Delhi, Noida, Greater Noida and Ghaziabad," said IGL Managing Director Narendra Kumar.
Industry sources said, IGL, which is a private firm controlled by state-owned GAIL and BPCL and Delhi government, is likely to hold rates till BJP is able to cobble a government in the national capital or till fresh assembly elections are held.
IGL is likely to incur about Rs 100 crore loss for holding prices, they said.
For RIL's flagging D1&D3 gas fields in KG-D6 block, where output should have been 80 mmscmd but is languishing at less than 8 mmscmd, the notification said the current USD 4.2 per mmBtu rate will continue to apply.
Consumers will, however, pay the revised increased price but RIL will get only USD 4.2 per mmBtu with the difference being deposited in an escrow account.
RIL will get the higher rates if it is legally able to prove that it did not deliberately cut production and output fall was a result of geological reasons as it claims.
"The matter relating to cost recovery on account of shortfall in envisaged production from D1, D3 discoveries of Block KG-DWN-98/3 (KG-D6) is under arbitration.
"The difference between the price, determined under these guidelines converted to NCV basis and the present price (USD 4.2 per mmBtu), would be credited to the gas pool account maintained by GAIL and whether the amount so collected is payable or not, to the contractors of this blocks, would be dependent on the outcome of the award of pending arbitration and any attendant legal proceedings," it said.
Higher gas prices would increase the expense of running power stations and fertiliser plants, raising infrastructure and food costs and accelerating the rate of inflation.
Every dollar increase in gas price will lead to a Rs 1,370 per tonne rise in urea production cost and a 45 paise per unit increase in electricity tariff (for just the 7 per cent of the nation's power generation capacity based on gas).
Also, there would be a minimum Rs 2.81 per kg increase in CNG price and a Rs 1.89 per standard cubic metre hike in piped cooking gas.