(a) the mechanism in place for fixing the prices of natural gas;
(b) whether the Government has revised the Administered Price Mechanism
(APM) of natural gas in the country;
(c) if so, the details thereof and the reasons therefor;
(d) whether any consultation was undertaken with the oil companies
in the wake of revision in the prices of natural gas;
(e) if so, the details thereof; and
(f) the likely impact of this revision?
MINISTER OF PETROLEUM & NATURAL GAS (SHRI S. JAIPAL REDDY)
(a) to (f) A statement is laid on the Table of the House.
STATEMENT REFERRED TO EN REPLY TO PARTS (a) TO (!) OF LOK SABHA STARRED
QUESTION NO. 120 TO BE ANSWERED ON 3RD MARCH, 2011 REGARDING FIXATION OF
PRICES AND NATURAL GAS
(a) There are broadly two pricing regimes for gas in the country - gas priced
under Administered Pricing Mechanism (APM) and non-APM or free market
gas. The price of APM gas is decided by the Government. As regards non-
APM/free market gas, this could also be broadly divided into two categories,
namely, (i) imported Liquefied Natural Gas (LNG), and (ii) domestically
produced gas from New Exploration Licensing Policy (NELP) and pre-NELP
fields. The price of LNG imported under term contracts is governed by the Sale
& Purchase Agreement (SPA) between the LNG seller & the buyer and the spot
LNG cargoes are purchased on mutually agreed commercial terms. As regards
NELP & pre-NELP gas, its pricing is governed by the terms of the Production
Sharing Contract (PSC) signed between the Government & the Contractor.
(b) to (e) The National Oil Companies (NOCs), viz., ONGC & OIL, have been
continuously requesting the Government that the price of APM gas should be
increased to be in parity with the market price, since they were incurring
significant under-recoveries in their gas business at the pre-revised price. To
make it financially viable for the NOCs to increase gas production, Government
has increased the price of APM gas w.e.f. June 2010, to US $ 4.2 per million
british thermal unit (mmbtu) inclusive of royalty to bring the APM gas price in
line with the price of gas produced from NELP fields. As regards customers in
the North-East, 40% of the price of gas is being paid as subsidy by the Union
Government.
(f) The impact of increase in APM gas price on the various sectors is not
expected to be substantial. In the power sector, APM gas based power generation
is a small component of the total power production in the country. Price of
subsidized fertilizers is regulated and the increase in fertilizers subsidy
due to increase in APM price is expected to be less than the increase in
Central Government`s revenue generation from the increase in APM gas price.