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Government to decide new gas price after budget session

Posted on Aug 11 2014 | IANS

New Delhi, Aug 11 : The government is considering a new price for domestic gas that would be lower than that suggested by the C. Rangarajan panel, while the decision would be taken after the budget session of Parliament, an official source said Monday.

Finance Minister Arun Jaitley, who will take the final decision on the formula to be applied for pricing domestic gas told the Lok Sabha earlier this month that the government was considering the matter.

The Cabinet Committee on Economic Affairs had on June 25 decided to defer implementation of the Rangarajan formula till Sep 30 and come up with a new regime by Oct 1.

The current gas price of USD 4.2 per million British thermal unit (mBtu) would have risen to USD 8.8 per mBtu based on the Rangarajan formula linking domestic price to the cost of importing liquefied natural gas (LNG) and rates in the US, Britain and Japan.

The new government has decided to defer the implementation till September-end to hold wider consultations with various stakeholders.

The petroleum ministry has suggested a deadline of end-August for completing discussions with gas producers as well as consumers such as urea and power plants.

A petroleum ministry source told IANS that a new panel is being asked to take into consideration the concerns of the power and fertilizer ministries about the impact of the steep hike recommended by the Rangarajan committee.

Critics of the Rangarajan formula point out that it includes Japan's import prices even though that country is not a producer.

Among the options being considered is rupee-pricing of gas, as has been suggested by Jaitley, so as to cushion prices against foreign exchange volatility.

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