The government on Saturday has fixed new gas price at USD 5.61 per million british thermal unit (MMBTU), increased from USD 4.2 per mmbtu earlier, reports CNBC-TV18. However, it has reduced diesel price in Delhi by Rs 3.37 per litre following sharp fall in crude oil prices in international markets.
This new gas price hike will be effective from November 1, 2014 while the diesel price cut will be effective from today midnight.
Domestic gas pricing has approved by the Cabinet today, said Finance Minister Arun Jaitley (after a cabinet meeting), adding the new gas price hike will be effective prospectively and will be revised on a half-yearly basis.
The Cabinet modified the Rangarajan formula approved by previous UPA government to bring down the increase in rates from USD 8.4 to USD 5.61, Jaitley said.
He further said, henceforth, diesel price will be linked to the market. On the DBT, he said, the government will link direct benefit transfer with Jan-Dhan Yojana and has decided to relaunch DBT scheme.
"We have decided to reduce prices and in Delhi, prices are likely to go down by Rs 3.37 a litre from midnight tonight," said B Ashok, chairman of Indian Oil Corporation , the country's biggest fuel retailer.
Kirit Parikh, former Planning Commission member, said he is delighted with the government's decision to deregulate diesel. "This move is a step in the right direction. Deregulating diesel will have positive effect on fiscal situation," he added.
Lalit Kumar Gupta, managing director and chief executive officer of Essar Oil , too welcomed the government's decision to deregulate diesel.
"Deregulation will up competition & benefit end-consumer and for upstream companies, this leaves more money to invest in exploration and production, Gupta added.
Former Oil secretary SC Tripathi said deregulation should improve competition and bring more players into market.
"This is the proper moment to deregulate diesel and excluding Japanese price from the formula is the right move," he added.
According to him, if crude rises, subsidies must go to players on per litre basis.
Meanwhile, the natural gas prices have not been increased since past three years as the oil ministry faced stiff resistance from power and fertiliser ministry.
Energy expert Narendra Taneja said today's gas price hike will boost production without making power or fertiliser too expensive.
However, RS Sharma, the former ONGC CMD, said he is disappointed with new gas price as the quantum of hike is not enough.
According to him, imported gas costs around USD 13-14 per mmbtu, so USD 7 is a better price than USD 5.61 per mmbtu.
Natural gas distribution company Indraprastha Gas is the first company that decided to hike CNG prices post gas price hike decision. It said CNG prices will be hiked by Rs 4.50 per unit and domestic gas prices will be up by Rs 2.66 per unit."
(With inputs from agencies)
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