GAS-PRICES 2LST

State-run Oil and Natural Gas Corporation (ONGC) and Oil
India Limited (OIL) produce 54.32 million cubic metres of gas
per day, or about 40 per cent of the total gas produced
in the country, from fields given to them on a nomination
basis.
This gas is sold at government controlled rates, with
about 50 mmscmd allocated to power and fertilizer units and
city gas projects at USD 1.79 per mmBtu and the remainder to
other industries at USD 4.75 per mmBtu.
"ONGC and OIL have been making substantial losses in
their gas business. The (current) low prices of gas have
discouraged national oil companies from making investment (in
raising dwindling output). Therefore, it became essential to
increase the price of gas," Sundareshan said.
On top of the USD 4.2 per mmBtu APM gas price tag, state
gas transportation and marketing firm GAIL India would be
allowed to charge Rs 200 per thousand cubic metres, or 11.2
cents per mmBtu, as a marketing margin. There would also be
taxes, pipeline transportation charges and other levies.
The new price will be for the period up to March 31,
2014, the time till when Reliance Industries has been allowed
to charge USD 4.2 per mmBtu for gas from its KG-D6 fields.
The government controls rates of gas produced by ONGC and
OIL from fields given to them on a nomination basis (called
APM gas). The APM gas price were last revised in 2005 to Rs
3,200 per thousand cubic metres (USD 1.79 per mmBtu).
ONGC, in 2008-09, lost Rs 4,745 crore in revenues on
selling 17.71 billion cubic metres of gas at the government
fixed rate.
The Petroleum Ministry had previously wanted to raise the
gas price in stages to USD 4.2 per mmBtu. It wanted rates paid
to ONGC and OIL to be immediately hiked to Rs 4,142 per
thousand cubic metres (USD 2.32 per mmBtu). The consumer price
at this rate would have been 10 per cent higher at USD 2.55
per mmBtu. Thereafter, the rates were to be hiked to USD 4.2
per mmBtu in three more installments.
However, on the insistence of the Finance Ministry, the
oil ministry withdrew the proposal and moved a fresh one
seeking to raise the price of the gas under APM to Rs 7,500
per thousand cubic metres, or USD 4.2 per mmBtu, sources said.
The Finance Ministry wanted the hike to happen in one
stage and not in stages, sources said.
About 39 per cent of the nation's 140 million standard
cubic metres a day of gas output is sold at administered
rates. A hike in these rates is an attempt to reduce
distortions in a market with more than a dozen prices.
The government has set USD 4.2 per mmBtu as the sale
price of gas from Reliance Industries' eastern offshore KG-D6
fields, while the gas from BG Group-operated Panna/Mukta Tapti
fields is sold at USD 5.73 per mmBtu.
Sources said 54.32 mmscmd gas produced by ONGC and OIL is
sold at APM rates. PTI ANZ
RDM


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