Elections are fast approaching: there is no other justification behind the governments decision to completely overlook the Finance Bill 2012, which was passed by the National Assembly just two weeks ago. The Finance Bill, now Finance Act 2012-13, categorically states that the Gas Infrastructure Development Cess for various sectors would range from Rs100/mmbtu to Rs300/mmbtu. But it turns out that the government is not willing to act rationally anymore and all the talks of gradually rationalising gas prices have comfortably taken the back seat. Experts have long argued that natural gas usage at the domestic level should be carefully monitored and prices should be rationalised to promote efficient usage, but the government opted for the exact opposite, by reducing domestic sector gas prices by 19 percent from January 2012. More disappointing is the governments stance on the CNG sector, as 60 percent parity with petrol price will be maintained from here on, as agreed with CNG associations. It sends the government back to square one, as all the measures to limit the use of gas in transport sector will bite the dust due to this blow. The price reversal also means that the government has withdrawn from its earlier decision of charging Rs200-Rs300 per mmbtu on CNG, which will most definitely result in failure in achieving cess collection target of Rs30 billion for the current fiscal year. So much for the efforts made towards LPG replacing CNG in the country, as the existing price parity with petrol will never make this feasible. Whether the decision is aimed at appeasing the masses or the CNG lobby is anyones guess. Slashing gas rates appears to be the weapon of choice to woe farmers too. The Oil and Gas Regulatory Authority (Ogra) took analysts by surprise by announcing huge cuts in rates charged on natural gas supplied as feed stock to fertilizer manufacturers. Far from the proposed cess of Rs300/mmbtu, the government has effectively withdrawn Rs197/mmbtu from the previously imposed cess, taking feed stock rates to 2011 levels. But farmers may still be left in the lurch if the fertilizer companies decide to use the lower rates to beef up margins and make up for production losses during gas curtailment. Recall, that the Petroleum Minister hinted at gradual phasing out of feedstock subsidy earlier this year when the infrastructure cess was initially imposed. The minister was seen lauding the governments decision, claiming it to be a landmark achievement to bring relief to the common man. The recent steps may or may not win votes for the government in the upcoming general elections. But they will definitely make the task of fiscal management much harder for the next government.
============================================== CONSUMER GAS PRICES ============================================== (Rs/mmbtu) Jul-12 Jan-12 chg ============================================== Domestic (minimum) 100 123 -19% Commercial 600 600 0% CNG 619 736 -16% Fertilizer (feedstock) 116 313 -63% Power 460 508 -9% ==============================================
Source: Ogra
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