The government may hike the price of natural gas produced by ONGC and Oil India Ltd by over 17 per cent and index it to inflation rate to help the two firms cut losses on selling fuel below cost.
The petroleum ministry has prepared a draft Cabinet note for raising prices of natural gas produced by ONGC from fields given to it on nomination basis to Rs 3,765 per thousand cubic metres (or $1.98 per million British thermal unit) from current Rs 3,200 per thousand cubic meter ($1.68 per mmBtu).
For OIL, the gas price has been proposed at Rs 4,205 per thousand cubic meters, a senior ministry official said.
ONGC currently loses about Rs 3,000 crore (Rs 30 billion) in revenues annually on selling gas from fields like Bassein and Mumbai High at gvernment capped price.
"The Cabinet note is ready and will be circulated once peroleum minister Murli Deora approves it. In all likelihood, the proposal may go to Cabinet sometime next month," he said.
The price would change by Rs 55 per thousand cubic meter for every 10 points change in Wholesale Price Index.
Price of gas produced by ONGC and OIL from fields given to them on nomination basis, called the Administered or APM rate, were last revised in June 2005.
APM price would be raised to $4.20 per mmBtu in stages over the next three years, the official said adding this would bring rates at par the sale price of gas produced by Reliance Industries from its giant KG-D6 fields.
The official said the Cabinet at the last gas price revision in 2005 had asked the Tariff Commission to recommend producer price for ONGC and OIL.
The Tariff Commission had recommended a producer price of Rs 3,600 per thousand cubic metre for ONGC and Rs 4,040 per thousand cubic metre for OIL.
It also recommended a Rs 55 per thousand cubic metre rise in producer price for every 10 points change in WPI over 189.40 of March 2005.
The monthly WPI current is at 232.7, which translates to a price increase of Rs 165 per thousand cubic metres over the normative producer price recommended by the Tariff Commission.
Though the Tariff Commission was asked to determine the producer price effective from July 1, 2005, the price increase would be brought into effect prospectively, he added.
The official said consumer price for power and fertiliser units outside North-East may be fixed at 10 per cent above the producer price i.e. Rs 4,141.5 per thousand cubic metre while for the plants in NE it would be 60 per cent of the price i.e. Rs 2,259 per thousand cubic metre.
Consumer price for transport and small consumers outside NE may be fixed at 20 per cent above the price for power and fertiliser sectors i.e. Rs 4,969.8 per thousand cubic metre.