Gas Price Hike Postponed Due To General Elections
Biswajit Yadav / 25 Mar 2014
In a move which could cost the Indian oil companies to face a turbulent time, the Election Commission (EC) has asked the Government to delay the gas price hike. The new gas prices were to be effective from 1st of April 2014, but now have been pushed back till the end of the Lok Sabha elections.
The Election Commission (EC) of India has asked the government to delay the hike in gas price till the end of the general election in the third week of May. The hike in gas price was to be effective from 1st April, 2014. The hike in gas price was massive; it was to be doubled from the current rate at $4.2 per million metric British Thermal Units (mmBtu) to around $8.4 per mmBtu.
Aam Admi Party leader Arvind Kejriwal had asked the Election Commission on 20th March that the decision of the Union Government to hike the gas prices from 1st April was in violation with the Model Code of Conduct. In a subsequent reply to the query, the election commission has asked the government to suspend the hike in gas prices from the month of April to the end of general elections.
However, Petroleum Minister M Veerappa Moily clarified to the media that the decision on the gas price hike was cleared twice, once in the month of July 2013 and the second time in December 2013. The main motive behind gas price hike was to boost production activity and to make the sector more attractive to the foreign investors.
While, the decision has came as a shock for the upstream companies like Oil and Natural Gas Corporation (ONGC), Oil India (OIL) who were looking forward to hike price from the month of April, 2014. Apart from these Reliance India (RIL) and Cairn India is also going to be affected due to delay in price hike. All the PSU oil companies are going to be affected because this decision as companies along with their joint venture, contributes around 80 % of the total gas production in India. The increase in domestic gas price would have increased the annual revenue of ONGC around Rs 12000 crore on producing 60 million standard cubic metres per day, OIL by Rs 1,500 crore on 8 mscmd production and Rs 3,000 crore for RIL on 13.11 mscmd output. If the price hike would have gone according to the date, the government from the petroleum sector would have garnered around Rs 13500 crore as profit.
Due to this the stocks of the companies have remained in pressure.
| Share price movement on BSE (Rs) | |||
|---|---|---|---|
| Companies | 25/03/2014 | 24/03/2014 | Change % |
| ONGC | 320.1 | 321.2 | -0.3425 |
| OIL | 471.7 | 485.05 | -2.7523 |
| Cairn India | 332.05 | 332.6 | -0.1654 |
| RIL | 878.65 | 904.6 | -2.8687 |
| Essar Oil | 48.95 | 49.55 | -1.2109 |
The share price of RIL and OIL fell sharply today. Reliance Industries closed today at Rs 878.65 down by more than 2.86% as compared to the previous close, while the share of Oil India also plunged by more than 2.75%. ONGC closed down by 0.34% as compared to the previous close, while the share price of Gujarat gas has also plunged by more than 1.44%.
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