Proposed gas prices hike shot down by political compulsions

New Delhi, Jan 26 | Updated: Jan 27 2005, 07:11am hrs
The group of ministers led by defence minister, Pranab Mukherjee could not finalise the proposed hike in gas prices as political factors weighed heavier than economic considerations.

According to sources, petroleum minister, Mani Shankar Aiyar has been pushing for reforms in the gas sector and had recommended introduction of differential prices for natural gas.

They add that the finance ministry had almost endorsed the views of Mr Aiyar to effect an increase ranging between Rs 350 to Rs 450 per thousand cubic meters, on the plea that gas price hike will accrue an additional Rs 1,000 crore as non-tax revenues in the form of an enhanced payment of royalty on gas production and dividend from Oil and Natural Gas Corporation (ONGC).

However, the proposal raised a storm and the ministers for power and fertilizers and steel, PM Sayeed and Ram Vilas Paswan respectively, asked the ministerial group to refrain from going ahead with a price hike in view of the assembly polls in the Bihar, Jharkhand and Haryana.

All these states are leading producers of power, steel and agro-products.

The fertilizer and steel minister, Mr Paswan, even abstained from attending the meeting.

He is learnt to have given the reason of ensuing elections in Bihar and Jharkhand. The decision to effect an increase has been deferred till February end, sources added.

A senior official in the fertilizer ministry said that the government wanted to benchmark the gas prices to international levels, which have lately seen a steep increase in the prices of gas, naphtha and fuel oil.

This, the official said, could upset the applecart of the ruling United Progressive Alliance (UPA) as it would have led to a steep hike in the prices of fertilizers, steel, power and consequently agro-products, thus annoying the electorate in the bargain.

Finally, sources said that the matter was defferred till the Tariff Commission gives its recommendations on prices of gas produced by ONGC and other producers.