It has taken 5 years for the Govt to finally give in to industrys demand of hiking APM gas prices at USD 4.2/mmbtu, prices are up over a 100%. So what will the impact be on consumer industries like power and fertiliser?
Oil secretary S Sundareshanhas reason to smile. The oil ministry has managed to wrangle a much needed hike in gas prices to USD4.2/mmbtu. But what is even more surprising is the support from the Finance ministry, which pushed for a steeper one time hike as opposed to a staggered increase. While Oil and Gas industry is relived, users of gas like power and fertiliser sectors are worried.
While there is some clarity on the impact on power traiffs, CNG providers like Indraprastha are still unlcear on the quantum of hike, and this impacted sentiment in the stock markets, with the IGL stock losing over 5%. But the Oil secretary, defends the move saying it will make prices more equitable as so far only consumers in Delhi and Mumbai enjoyed low prices.
S Sundareshan, Oil Secretary, says, “The other CNG consumers in the country and potential cosnumers would have benefitted from the network of pipe gas supply being extended to other cities would have really had to get gas from other sources other than at APM prices. so govt has done--approx equitable prices of gas from all sources in the country.”
The fertiliser sector will also feel the impact but the govt says the subsidy burden will be more than neutralised by the increase in govt royalty of 16%.
What is going to come back to the govt in terms of additional dividend from upstream companies, the additional taxation, and so o. We have calculated is more than, probably offset the additional burden on subsidising the fertiliser sector that would have to happen because of the increase in prices, says Sundareshan.
After convincing the cabinet to bite the bullet on gas, the oil ministry is hoping to do the same with the Kirit Parikh report on fuel prices, which is likely to be discussed by the empowered group of ministers on the 7 June.
Source: http://www.moneycontrol.com
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