New Delhi: In the wake of the recently proposed natural gas price hike, the Power Ministry has sought suggestions from stakeholders to mitigate its impact on electricity tariffs.
According to sources, the Power Ministry, at a meeting with the states and other stakeholders involved in gas-based power generation, sought suggestions on ways to ease the impact of the proposed gas price hike.
The government last month approved the doubling of gas prices to USD 8.4 per million British thermal units from April 1 next year. The step may result in higher power tariffs, urea costs and CNG prices.
All domestically produced gas will be priced as per a formula suggested by a panel headed by the Prime Minister's economic advisor, C Rangarajan. The formula uses long-term and spot LNG import contracts as well as international trading benchmarks to arrive at a competitive price for India.
While the Oil Ministry had reasoned that the gas price hike was needed to incentivise exploration and increase revenue for the government, the power and fertiliser ministries had opposed the move.
The Power Ministry had said electricity generation at any price of over USD 5 was economically not viable. Also, it had questioned the need to price the fuel in dollars as any depreciation in the Indian currency would add to the strain on consumers.
Recently, Finance Minister P Chidambaram had said the concerns of the power and fertiliser sectors would be addressed before the increase is implemented.
Chidambaram said only the price payable to gas producers has been fixed now, while the input rates for power and fertiliser users have not been decided. He also said the Oil Ministry has asked the power and fertiliser ministries to indicate an affordable gas price.
Meanwhile, the Finance Ministry has written to the Oil Ministry, seeking "appropriate action" on suggestions for putting a cap on how much gas prices can be raised.