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Transport, Power To Cost More As Gas Price Doubled

Taxi, auto and bus fares as well as cost of cooking in households getting piped gas in the National Capital and Mumbai will go up substantially as the government on Wednesday more than doubled the
PTI May 20, 2010 9:10 IST
PTI
Taxi, auto and bus fares as well as cost of cooking in households getting piped gas in the National Capital and Mumbai will go up substantially as the government on Wednesday more than doubled the price of gas it controls. As a double whammy, cost of electricity will also rise across the country, though not as much as driving or cooking fuel, reports Times of India.  

The Cabinet raised the price of gas produced from fields that were given to state-run ONGC and Oil India without bidding from $1.79 per unit to $4.20 to help these companies recover cost of operation. The revised price is the same that the government had set for gas from Reliance Industries Ltd's Andhra offshore field.  

A quick calculation shows the government's decision will impact CNG price in Delhi and its neighbourhood by up to Rs 6 per kg, including incremental increase in taxes and wheeling charges. In Mumbai too, the impact will be around the same. For piped kitchen gas, the impact will be over Rs 3.50 per unit, or standard cubic metre.  

An upward revision of CNG and piped kitchen gas prices is certain as over 90% of the volumes sold by Indraprastha Gas Ltd in Delhi and Mahanagar Gas Ltd in Mumbai comes from government-controlled gas. With the price of the bulk of input more than doubling, the companies are bound to raise prices as soon as the government notifies its decision.  

The government's decision will not have any impact on Gujarat, as the CNG and piped kitchen gas suppliers in the state sell gas from joint venture fields and shipments of LNG that cost as much as the new price or more since they are outside the government's control.  

The impact on electricity tariff will be about 2.75% on overall basis as the power produced using government-controlled gas makes up about 11% of the overall generation capacity in the country. Usually, every dollar rise in gas costs pushes up cost of generation by 50 paisa per unit but for the consumer, the actual increase is more due to incremental increase in wheeling cost etc.  

Even after the rise, as oil ministry's calculations show, CNG in Delhi will remain approximately 30% cheaper than diesel. At present, CNG is about 40% cheaper than diesel, going by per km running cost.  

The decision to raise the gas price marks the first instance of the government biting the bullet on fuel prices.  

The proposal has been hanging fire since the last days of the UPA-1 government, or over a year. Initially, the proposal was to revise the price in stages but the finance ministry pushed the oil ministry to leapfrog the hike.

The decision shows a new-found boldness of UPA-2. Next in line could be petrol and diesel prices.  

A group of minister on the issue is to meet in the first week of June to decide freeing at least petrol pricing from government control and raise diesel prices by Rs 2-3 per litre to check losses of state-run oilmarketing companies.  

ONGC and OIL will now get $3.8 per unit for gas from their old fields. After adding 10% royalty, the fuel will cost $4.20 per unit to consumers. On top of this, state-run gas utility GAIL will now charge over 11 cents per unit as marketing margin.