Power min warns gas price hike may negate bailout package

Power ministry is pitching for adopting differential pricing method for arriving at quantum of gas price hike, as the current price hike of USD 6 per mmbtu suggested oil minister Verrappa Moily is likely to negate the bailout package extended for the sector by government.

 Power ministry is pitching for adopting differential pricing method for arriving at quantum of gas price hike, as the current price hike of USD 6 per mmbtu suggested oil minister Verrappa Moily is likely to negate the bailout package extended for the sector by government, reports Siddharth Zarabi. 
Also read: Why RIL, Rangarajan or Moily should not decide gas prices
The Cabinet Committee of Economic Affairs today postponed the decision on gas price hike as oil minister was away on an official tour. Power ministry has been opposing hike in gas price beyond USD 5 per mmbtu as it would result in high per unit power cost which may not find any takers in the current lean period.
Below is Siddharth Zarabi’s take on the power ministry’s opposition to gas price hike.
The sense that I get from speaking with officials who were concerned with this matter and also seeing some material on the record is that the power ministry has actually in some means nuanced its supposition and this has been an opposition which has been for many years to a gas price hike. It is now saying that considering the negative impact gas price hike would have on the downstream sectors like power, differential pricing should be looked at.
Now, I asked people whether a differential pricing scheme was possible. Because if you were to do differential pricing hypothetically for one sector then you would probably have to do it for another sector. That sort of pricing is in effect already in place when it comes to allocations and certain subsidy linkages that the government provides. The point really at this stage is that as far as the power ministry’s stance is concerned, I would go to the extent of saying that while it raises the red flags, it is actually in some ways providing a window of opportunity for this hike to happen.

 
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