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The department of fertiliser is worried that the government has not increased its subsidy in the interim budget although gas prices will double next month, but the oil ministry has turned down its request for cheaper gas as the department was involved in the Cabinet's decision to raise gas rates. Gas customers are worried about both the falling output of natural gas from Reliance Industries-operated KG-D6 block as well the new pricing formula that will double gas price to about $8.4 per unit from April 1.

Output has fallen from 60 million metric standard cubic meters a day (mmscmd) in 2010-11 to about 13-14 metric standard cubic metersd this year. It was 13.28 metric standard cubic metersthis month, marginally below February's 13.63 mmscmd in February. Fertiliser units get top priority in supply of scarce natural gas, which is the raw material to make urea that is sold to farmers at subsidised rates.

The government has estimated that every $1 increase in gas price would raise urea cost by INR 4,144 crore per annum. The fertilisers department asked for lower prices last month on the ground that the annual subsidy burdem would increase by INR 10,000 crore but oil ministry officials responded by saying the Cabinet decision to adopt the Rangarajan formula for gas pricing was taken collectively, after which the government is bound to implement it.

"The revised gas pricing formula was approved by the cabinet committee on economic affairs after due consideration of the views of various stakeholders. The department of fertiliser was part of the decision making," one official in the oil ministry said requesting anonymity.

"The issue of raising gas prices has been deliberated twice in the Cabinet, once in June and later in December last year. The formula is also notified in January. Now, department of fertiliser should approach the finance ministry for raising fertiliser subsidy," another government official with direct knowledge of the matter said.

Source-On Request