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Govt raises gas price to $5.61 per unit, deregulates diesel
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SME Times News Bureau | 19 Oct, 2014
Taking major decisions impacting the hydrocarbons sector, India's
federal cabinet Saturday made the long awaited revision in domestic
natural gas prices, deregulated diesel and remodified the scheme to give
direct cash to consumers on subsidy for cooking gas.
The
cabinet also approved other projects related to infrastructure,
including a metro rail project in Ahmedabad, highway projects worth
Rs.1,476.56 crore, as well as a productivity linked bonus for railway
employees.
In what could be seen as a setback for private
hydrocarbon explorers, the government said natural gas prices were being
revised to $5.61 per unit as opposed to the industries demand for
atleast doubling it to a little over $8 per unit.
Speaking to
reporters after the cabinet meet, Finance Minister Arun Jaitley said:
"The original natural gas price was $4.2 per unit; Rangarajan Committee
has followed a particular criteria and announced a price of $8.4 per
unit, which was to be implemented from April 1, 2014, which
implementation was halted by the Election Commission so that the new
government can take a view on the matter."
"We reviewed the
entire criteria. We looked at the various hubs which has been
considered. We also looked at the various hubs which has been ignored.
The cabinet approved the report of Secretaries Committee. The price now
fixed is $5.61 per unit," he added.
"As per the formulation
approved by the CCEA today, upward revision in gas prices will be
approximately 75 percent less as compared to the price arrived at using
Rangarajan formula," said the Cabinet Committee on Economic Affairs
release.
Regarding the new price applying to gas from the
Reliance Industries' (RIL) fields in the eastern offshore, the statement
said that as the matter was under arbitration, RIL would be paid the
earlier price of $4.2 per unit till the shortfall quantity of gas is
made good.
The arbitration concerns the penalty imposed by the
oil ministry on the company for failing to meet output targets from
RIL-led consortium's D-1 and D-3 fields in the KG-D6 eastern offshore
block to the extent of 1.9 trillion cubic feet of gas.
Announcing
the diesel price deregulation, Jaitley said: "Price of diesel will be
linked to the market, and therefore, depending on whatever is the cost
involved, is the element that consumers will have to pay."
"Just
like petrol prices, diesel cost will now be governed by market forces.
The diesel prices were being increased by 50 paise or so over the last
few months. The prices should come down as the global crude oil prices
have dropped substantially in recent times," he added.
The
cabinet also decided to relaunch the Modified Direct Benefit Transfer
Scheme in LPG (cooking gas) in 54 districts from mid-November and in the
rest of country from Jan 1, 2015.
"The cabinet has revisited the
scheme design and processes and after thorough review, it has approved
the modified DBTL," the statement said.
Jaitley said that "in
addition to the Aadhar platform, all those with bank accounts will get
LPG subsidy to their accounts directly".
Indian industry welcomed the diesel price decontrol as a highly progressive move.
"The
price of fuel products such as diesel should reflect the true market
value and this would also encourage all users to economise on their
diesel consumption and hence aligns with the objective of promoting
environmentally sustainable growth," industry chamber FICCI president
Sidharth Birla said in a statement.
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