Gas price hike faces fertiliser hurdle

The fertiliser ministry has opposed an oil ministry proposal to raise the price of PSU gas sold under the administered price mechanism because it would increase its subsidy burden.

“We have prepared a cabinet note seeking an increase in APM (administered price mechanism) gas price. However, the fertiliser ministry has opposed it stating that it would increase the subsidy burden. The note, with comments from various departments, would be placed before the council of ministers soon,” a senior petroleum ministry official said.

The officials said the cabinet was unlikely to take a call before the upcoming budget.

In the note, the petroleum ministry has sought an increase in APM gas prices to $2.4 per million British thermal unit (mBtu) from $1.8 per mBtu. Eventually, it wants the price to be raised to $4.2 per mBtu, which is the one recommended by the empowered group of ministers for the gas produced from Reliance Industries’ fields in the Krishna-Godavari basin.

According to sources, the proposal, if accepted, would increase the fertiliser ministry’s subsidy burden, which is already at Rs 50,000 crore for this fiscal, by at least another Rs 20,000 crore.

“The government wants to cap the subsidy for fiscal management and any increase in input costs will raise the subsidy burden. There will be a problem in the allocation of the subsidy,” a fertiliser ministry official said. Fertiliser firms consume around 30 per cent of the APM gas.

The budget for the current fiscal has forecast an unprecedented fiscal deficit of over Rs 4 lakh crore, or 6.8 per cent of the gross domestic product.