The Union Cabinet is likely to take up next week the issue of price hike for the Administered Price Mechanism (APM) natural gas produced by Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) by almost 30 per cent and bring it almost on a par with the prevailing rate of $4.20 mmBtu.
Although the Power and Fertilizer Ministries opposed any hike in the APM gas price, the Petroleum and Natural Gas Ministry is going ahead with it stating that the present rates were unviable and would not incentivise ONGC and OIL to make further investments in exploration of gas assets.
The Petroleum Ministry had long back circulated the Cabinet note on the issue that called for raising the gas price under the administered pricing mechanism (APM) from Rs. 3,200 ($1.79 per million British thermal unit) to Rs. 4,142 per thousand cubic metres ($2.32 per mmBtu). The price of gas produced from the fields given to ONGC and OIL on a nomination basis is proposed to be raised in stages to Rs. 7,500 per thousand cubic metres or $4.2 per million British thermal unit by 2013.
“The matter is pending for Cabinet consideration and I am hopeful that it will be taken up for discussion soon. There is a need to revise the current prices in order to ensure that ONGC and OIL do not face financial losses which erode their capability to invest further in such assets,” Petroleum and Natural Gas Minister Murli Deora told The Hindu.
This is in line with the firm stand of the Petroleum Ministry to bring about uniformity in the gas prices to end differential pricing of natural gas that ranged from under $2 to $5.73 per mmBtu for gas produced by BG Group-operated Panna/Mukta and Tapti fields. Interestingly, while the Power and Fertilizer Ministries are learnt to have opposed any kind of hike, the Finance Ministry and the Planning Commission are backing the proposal.
The Petroleum Ministry, in its note, proposed raising the APM gas price from $1.79 per million British thermal unit to $4.20 per mmBtu in phases over the next three years. In 2008-09, ONGC lost Rs. 4,745 crore in revenues on selling 17.71 billion cubic metres of gas at the government fixed rate and therefore the increase in prices to $4.20 per mmBtu would help the firm break even. The gas prices of ONGC and OIL were last revised in 2005.