Press Releases

[New Delhi, May 28, 2005]

Gas Price Increase – No adverse impact on GAIL
(Sl. No. ND/CC/05/46)

It is learnt from the Ministry of Petroleum and Natural gas that the Cabinet has approved a revision in the price of Natural Gas. The revised price of Rs 3200/1000scm will now be applicable to the customers in the power and fertilizer sectors, Agra-Ferozabad region, CNG distribution, customers drawing less than 0.05 MMSCMD gas and also for fuel consumption by GAIL in the HVJ Pipeline system. The price for all other industrial consumers will be around $3.86/mmbtu (approx. Rs 6740/1000scm), which is equivalent to current RLNG price.

The increase in gas price in not likely to have any adverse impact on GAIL’s profitability. The enhanced gas price would increase the operational costs of GAIL towards internal consumption of gas for running compressors of HVJ pipeline and feedstock for petrochemicals and LPG plants by about Rs. 875 Crores. However, this would be more than offset by reduction in the subsidy burden, which was Rs 1137 crores during 2004-05.

Out of the subsidy burden of Rs 1137 crores, about Rs 535 crores pertains to domestic LPG and the balance Rs 602 crores towards PDS kerosene. Since GAIL does not produce or market kerosene, Government has already agreed to keep GAIL out of the kerosene subsidy burden. Regarding LPG, the whole rationale behind the sharing of subsidy burden was based on the premise that GAIL was using APM gas as its feedstock. Since GAIL will henceforth pay RLNG price (approx. Rs 6740/1000scm) for its LPG feedstock, this premise no longer holds good. Therefore, there is no rationale behind GAIL sharing any subsidy burden either on account of PDS kerosene or domestic LPG.

In view of the above, the enhanced gas price is expected to increase the profitability of GAIL.