Diesel deregulated

Natural gas price hiked

• Diesel cheaper by Rs.3.37 a litre, to follow global oil prices
• Natural gas price raised to $6.17 per mmBtu from Nov 1
• Rangarajan panel recommended hike at $8.4 from $4.2

New Delhi: In a major reform push, the government on Saturday deregulated diesel prices but hiked natural gas tariff by 46 per cent that will push up fertiliser, power, CNG and PNG rates.

The deregulation of diesel will bring down rates by Rs 3.37 a litre from midnight tonight and will move in tandem with international cost from next month.

This will be the first reduction in diesel rates in over five years. Diesel price were last cut on January 29, 2009 when they were reduced by Rs 2 a litre to Rs 30.86. After deregulation, government will no longer provide subsidy on diesel.

Against the backdrop of the steep doubling of rates to $8.4 recommended by Ranagarajan Committee and cleared by the previous UPA government, the government approved a 46 per cent increase in natural gas prices that will go up from current $4.2 per million British thermal unit to $6.17 per mmBtu from November 1. Briefing reporters, Finance Minister Arun Jaitley said the price was "sufficient incentive for drilling and investment" while at the same time "not excessively burden the consumers."

The gas price hike, according to a modified formula approved by the Cabinet, comes to $5.61 per mmBtu on gross-calorific value basis and $6.17 as per net calorific value - the principle used for calculating current $4.2 rate.

The natural gas price increase will result in CNG prices going up by Rs 4.25 per kg and piped cooking gas by Rs 2.6, even though Oil Minister Dharmendra Pradhan said states are being impressed upon to cut taxes to reduce the burden.

Besides, tariff for power produced from gas will go up by about 90 paisa per unit and fertilizer production cost by almost Rs 2,720 per tonne. There couldn't have been more opportune time for the decision on diesel prices. Oil prices are near a four-year low and two major state elections are out of the way. Reserve Bank Governor Raghuram Rajan has recently called on the government to "seize this moment", while inflation is the lowest in five years and refiners are selling at a profit for the first time ever. Brent crude has fallen 25 per cent this year to around $83 per barrel and expectation is that it may not cross $100 barrel any time soon. The process was set in motion by the previous UPA government when it eliminated controls on petrol prices in 2010 and in January last year decided to raise diesel prices by up to 50 paisa a litre every month.

Aadhaar not must for LPG subsidy
New Delhi: Cooking gas (LPG) consumers will be able to get subsidy directly in their bank accounts from November 15 even if they don't have Aadhaar numbers, as the government will re-launch the Modified Direct Benefit Transfer Scheme. The scheme will be initially re-launched in 54 districts from mid-November and in rest of the country from January 1.

Gas price hike not for Reliance
Reliance Industries will continue to get current $4.2 rate till it makes up for shortfall in output from KG-D6 block. For RIL’s flagging D1&D3 gas fields in KG-D6 block where output should have been 80 mmscmd but is languishing at less than 8 mmscmd, the Cabinet decided the current rates will continue to apply. Consumers will, however, pay the revised increased price but RIL will get only $4.2 with the difference being deposited in an escrow account. RIL will get the higher rates if it is legally able to prove that it did not deliberately cut production.