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

Gas prices were last revised in September 1997 and were due for revision for some time now.

The government decided last week to allow oil marketing companies to raise retail prices of petroleum products bringing petrol at 100 per cent and diesel at 50 per cent import parity.

A Cabinet note prepared by the petroleum ministry proposes to provisionally raise the price of natural gas from Rs 2,850 per thousand cubic metres (tcm) to a fixed price of 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 complete deregulation of the natural gas sector. All gas produced by private firms will be sold at market-determined prices, which is almost double the current administered price of Rs 2,850 per tcm. Transportation tariff on the trunk HBJ pipeline is also proposed to be increased by Rs 10 per tcm.

Sources said the proposal had been strongly opposed by the ministries of fertiliser, power and steel. The department of fertiliser wants natural gas to be priced at Rs 3,200 per tcm, irrespective of whether it comes from a public sector undertaking or a joint venture.

The department feels that urea manufacturing companies have already entered into long-term contracts with GAIL etc. for supply of natural gas and the price revision will hit them substantially. It has also opposed the increase in transportation charges along the HBJ pipeline.

Sources said the power ministry had opposed the move as it would violate the decision of the group of ministers, which had said prices should be raised for all natural gas supplies under the administered pricing mechanism only to Rs 3,200 per tcm.

The steel ministry has opposed the petroleum ministry's proposal to dispense with the gas linkage committee for allocation of supplies.

It has called for uniform gas prices for all sectors of the economy. It has also asked for a phased increase in gas prices so that steel units can get enough breathing time to adjust to new prices.