News Release Details
Paswan alert on gas price hike impact
Kolkata 28-Jun-2007
The fertilizer ministry fears subsidies will rise by Rs 1,800 crore if natural gas prices go up by a dollar. Ram Vilas Paswan, the minister for fertilisers and steel, has expressed this apprehension in a letter to Prime Minister Manmohan Singh. Fertiliser companies could even pay more than one dollar extra for natural gas, in which case the subsidy bill will rise in excess of Rs 1,800 crore. Power and fertiliser plants now buy a large portion of the gas at a fixed price of $2.5 per million British thermal units (mmbtu). However, gas companies want to hike the price to $4.5-6.5 per mmbtu. The government is now preparing its response to this demand. About 50 per cent of the gas is sold at fixed or administered rates. Fertiliser companies buy a part of their requirements from the market at prices in the range of $4.5-5 per mmbtu. The cabinet has set up a committee of secretaries on prices. The panel will report to the cabinet committee on economic affairs on the price mechanism. Paswan's contention is that fertiliser subsidies will go up by Rs 3,600 crore if the gas is sold at $4.5 per mmbtu. At $6.5 per mmbtu, the bill will go up by Rs 7,200 crore. Fertiliser prices are kept low by the government to appease the farm lobby. The farm sector has been reporting low growth rates in recent years. In some pockets of the country, such as Andhra Pradesh and Maharashtra, poor growth has forced farmers to commit suicide. In this volatile environment, it is unlikely that the government will pass on the higher price of the gas to farmers. Reliance Industries today added to the choices before the government. It said it was willing to sell the gas at $4.33 per mmbtu at the pit-head to power and fertiliser companies. This translates to a delivered price of $5-5.8 per mmbtu. The government needs to keep its fertiliser subsidy bill, which has bloated to around Rs 34,000 crore, in check. At the same time it needs to increase prices in line with global trends to encourage higher production of gas. The demand for gas is rising very fast in the country Fertiliser companies which now consumes around 36 million metric standard cubic metres a day (mmscmd) of gas will need about 76mmscmd by 20011-12.
Kolkata 28-Jun-2007
The fertilizer ministry fears subsidies will rise by Rs 1,800 crore if natural gas prices go up by a dollar. Ram Vilas Paswan, the minister for fertilisers and steel, has expressed this apprehension in a letter to Prime Minister Manmohan Singh. Fertiliser companies could even pay more than one dollar extra for natural gas, in which case the subsidy bill will rise in excess of Rs 1,800 crore. Power and fertiliser plants now buy a large portion of the gas at a fixed price of $2.5 per million British thermal units (mmbtu). However, gas companies want to hike the price to $4.5-6.5 per mmbtu. The government is now preparing its response to this demand. About 50 per cent of the gas is sold at fixed or administered rates. Fertiliser companies buy a part of their requirements from the market at prices in the range of $4.5-5 per mmbtu. The cabinet has set up a committee of secretaries on prices. The panel will report to the cabinet committee on economic affairs on the price mechanism. Paswan's contention is that fertiliser subsidies will go up by Rs 3,600 crore if the gas is sold at $4.5 per mmbtu. At $6.5 per mmbtu, the bill will go up by Rs 7,200 crore. Fertiliser prices are kept low by the government to appease the farm lobby. The farm sector has been reporting low growth rates in recent years. In some pockets of the country, such as Andhra Pradesh and Maharashtra, poor growth has forced farmers to commit suicide. In this volatile environment, it is unlikely that the government will pass on the higher price of the gas to farmers. Reliance Industries today added to the choices before the government. It said it was willing to sell the gas at $4.33 per mmbtu at the pit-head to power and fertiliser companies. This translates to a delivered price of $5-5.8 per mmbtu. The government needs to keep its fertiliser subsidy bill, which has bloated to around Rs 34,000 crore, in check. At the same time it needs to increase prices in line with global trends to encourage higher production of gas. The demand for gas is rising very fast in the country Fertiliser companies which now consumes around 36 million metric standard cubic metres a day (mmscmd) of gas will need about 76mmscmd by 20011-12.