Power, fertilizer subsidy decision rests with Finmin: Moily

Oil Minister Veerappa Moily today said that the decision to share the burden of higher gas price for sectors like power and fertilizers will be taken by the finance ministry in consultation with concerned sector ministry, reports CNBC-TV18's Aakansha Sethi.

Also read: Govt to help power sector cope with higher gas prices: FM

After government decided to double natural gas price to USD 8.4 per mmbtu from USD 4.2 mmbtu, sectors like power and fertilizers which are biggest consumers of the gas fretted about increase in their input cost.

Despite the finance minister P Chidambaram's assurance that input cost of these sectors can be fixed so as to keep electricity and urea cost down, there has been confusion over who will bear the difference between input and output cost of gas.

Interestingly the finance minister had earlier indicated that upsteam companies like ONGC may have to bear the burden of difference in input and output cost of gas. While upstream companies are seen benefiting from the gas price hike the gains may not be substantial. Moily stressed that gains of upstream companies will eventually come back to the government.

"Out of every USD 1 billion spent either by private party or by a government party USD 500-600 million will have to be paid back to the government plus tax and other benefits, royalty and other things. That means to say about 80 percent of the benefit will go back to the government not to the private party or not to the public sector," Moily said.

Thus government will be the biggest beneficiary.  Moily stressed that the government can always transfer benefits from one sector to another. "The government can always workout a financial mechanism by which some of these vulnerable sectors like the power, fertiliser and also the domestic connections can be looked into," he explained. 

Thus no public or private sector companies are likely to make win fall profits out of gas price hike decision. "In this process ultimately wind fall profit if at all will be back to the government that means to the people." Moily concluded.