A number of misconceptions have been floating around the issue of gas price hike. One such misconception is that the Government will increase fertilizer prices immediately, with the increase in gas price. It is alleged that this shall lead to increase in prices of all food grains produced by the farmers. We want to place certain facts for consideration.
Close to 40% of gas consumed in the country is imported in the form of LNG. Current price of LNG imported in the country is around $18 per MMBTU. Even at domestic gas price of $ 8 per MMBTU, imported LNG will be costlier by at least $10 per MMBTU, i.e. it will cost more than double the price paid to domestic gas producers. The moot point is why those who are raising the issue about higher domestic gas price are quiet about increased profits that international gas companies will be making by supplying gas to India at much higher prices. Are these vested interests aligned with those of the international gas companies?
Fertilizer prices are set by the government and not on the basis of cost of fertilizer production. About 75% of domestic gas is being produced by public sector companies. As per media reports, ONGC alone will benefit to the tune of Rs.16,000 crore following the price hike. Government’s income will also increase due to higher royalty and taxes. The increased income to the Government will be much higher than additional subsidy that it will have to shell out for the fertilizer sector. Thus, the Government will have no reason to pass on increased gas price to farmers.
With regard to power sector, we would like to clarify that gas produced by RIL is not being used presently by any power producer in the country. In any case, only 5% of power produced in India is produced from gas and the remaining 95% is produced by coal, hydel and nuclear power plants. Thus, this propaganda that gas price hike will increase power tariffs dramatically is misplaced.
Therefore, the issue about power and fertilizer rates going up due to increase in gas prices is only a political stunt devoid of facts.