Veerappa Moily puts off hike in gas price till June-end

NEW DELHI: Oil Minister Veerappa Moily has decided to hold gas prices at the current level of $4.2 per unit until the end of June and not allow retrospective revision of rates, essentially leaving these crucial decisions to the next government.

“The minister has decided not to raise gas price in the remaining part of this quarter. The new price will be applicable only from July 1, 2014,” a senior government official with direct knowledge of the matter told ET. The decision is the latest in a series of moves by various authorities to defer the increase in gas prices since June last year, when the Cabinet first approved the Rangarajan formula. The Rangarajan formula would have doubled gas rates from April 1, 2014.

In December last year, the Cabinet reviewed its June decision and decided to allow RIL higher prices subject to furnishing a bank guarantee which would be encashed if the company lost an arbitration case against the government. The Rangarajan formula, notified in January 2014, was supposed to be implemented from April 1 and revised every quarter. But the Election Commission vetoed the price rise until the end of polling in the second week of May. According to a PTI report, the prime minister’s office has asked the oil ministry for a status report on gas pricing.

“In any case, most of the quarter (April-June) will have passed by the time elections are over. Therefore, the minister has decided that the new price should be applicable from the next quarter,” said the official, requesting anonymity. The official said the new price would not be applicable from April 1. The existing price was approved for a period of five years ending March 31, which led many analysts and brokerages such as Nomura to believe that gas prices would be revised retrospectively.

“Post election, we expect the new government to decide fast on the gas price issue … In our view, an easy way out would be to adopt the already notified Rangarajan formula. We now factor in a gas price increase from July 1 (April 1 previously). For KG-D6, we continue to see a good case for a retroactive hike from April 1, 2014,” Nomura said in a research note after RIL announced results on April 18.

Government officials said the oil ministry is working with the department of fertilizer, urea manufacturers and gas producers to work out new buyerseller contracts that would be effective for the new gas price.