The government on Wednesday sharply raised the price of natural gas sold by state-owned ONGC and OIL from $1.79 to $4.2 per unit?the same price at which private sector RIL sells gas, a senior official said.
The state agencies? output till recently accounted for two fifths of the total gas produced in the country and is gradually declining as the stringent administered pricing regime discouraged them from making fresh investments.
On May 11, FE had reported that the government was planning to move towards a single-pricing regime based on arms-length principle for both PSU producers and their private sector rivals. The idea is to provide level playing field for both the state-run and private enterprises. The move would encourage ONGC and OIL to invest more in their gas exploration and production activities.
The decision to raise price renders the currently-loss making gas business of public sector producers a viable venture. But at the same time, costlier gas would mean higher cost of production for fertiliser makers and power producers.
While the price rise is likely to lead to an across-the-board increase in power tariffs, the subsidy burden of the government on fertilisers could go up because one of the mass use fertilizers?urea?requires gas and its sale price is still controlled by the government with the aid of subsidy. ONGC CMD RS Sharma welcomed the decision. ?The cabinet decision to raise the price of natural gas will help us in wiping out our under-recoveries. It would also make the gas business a viable venture,? Sharma told FE after the cabinet meeting.
Minister of state for petroleum Jitin Prasada had told the Parliament last month that ONGC has reported an under-recovery (revenue loss) of Rs 4,745 crore in 2008-09 on its gas business, leading to lack of investment for exploration and production activities. ONGC, which operates mainly in the Western offshore fields, has 297 nominated oil and gas blocks.
