Cabinet to take up gas prices

The government will discuss a series of measures for the petroleum sector on Wednesday, including raising gas prices, establishment of a petroleum regulatory board and additional investments by ONGC Videsh in Sakhalin I.

Officials said the Cabinet Committee on Economic Affairs was scheduled to take up the additional investment of $800 million by ONGC Videsh in Sakhalin.

The increase in investment is required because of cost escalation and advancing of production schedule. This has also resulted in a fall in the internal rate of return from the field.

The total investment will be raised to $2.5 billion from $1.78 billion sanctioned earlier. The company is expected to cap its investment in Sakhalin at $4 billion.

The CCEA will also take up North Eastern Electric Power Corporation's (Neepco) 600 Megawatt Kemang hydro-power project, which is estimated to cost Rs 2,500 crore (Rs 25 billion). The Public Investment Board has approved the project.

The Cabinet will also discuss the petroleum regulatory board Bill. The petroleum and natural gas ministry has proposed an appellate tribunal in the Bill, introduced in 2002.

The appellate tribunal can be approached to contest the decisions of the regulatory board. In addition, the penalties incorporated in the Bill are proposed to be increased.

The Bill will also empower the regulator for laying the broad principles of pricing. The price band for petroleum products is likely to be removed after the setting up of the board.

The petroleum ministry has also proposed a 12 per cent increase in natural gas price for fertiliser units and 26 per cent for power units.

On a provisional basis, the price of natural gas was proposed to be from Rs 2,850 per thousand cubic metres (tcm) to Rs 3,200 per tcm and Rs 3,600 per tcm for the fertiliser and power sectors, respectively.

The rates have been proposed in the period prior to the complete deregulation of the natural gas sector. Gas produced by private firms will be sold at the market determined price, which is almost twice the current administered price of Rs 2,850 per tcm.

Transpiration tariff on the trunk Hazira-Bijapur-Jagdishpur pipeline is also proposed to be increased by Rs 10 per tcm.