The gas price hike to USD 8.4 is close to the price which Rangarajan committee had referred, says Salil Garg, director corporates, India Ratings. Talking to CNBC-TV18, he says that the main concern is more from the point of power consumers and the power sector because ultimatelythey will have to bear the brunt of the price rise.
Below is the edited transcript of his interaction with CNBC-TV18: Q: As per your analysis on a calculation of USD 6.7 per mmbtu, you believe that power generation costs would go up about 9 paise per kilowatt hour. On the basis of 8.4, are you going to have to rework the math? A: We were also anticipating that at USD 6.775 per mmbtu, the fuel cost alone will increase by 56 percent for the gas-based power generation plants and in case we are looking at USD 8.4 per mmbtu then the fuel cost will almost increase by 100 percent assuming dollar-rupee parity at Rs 60. So, in case the dollar rupee was to decline further to Rs 65 then the fuel cost alone will be Rs 4.73 vis-à-vis the current equation of Rs 2.2. So, it will be an increase of almost 116 percent in the fuel cost alone. The 9 paise calculation is if you spread this increase across the entire power generation in the country, but I am specifically referring to the gas based power generation where the fuel cost increase will be much higher – will be close to 100 percent from next year onwards. Q: They have actually accepted Rangarajan's recommendation because as per the Rangarajan Committee the price would have been about USD 8.8 per mmbtu and that was the calculation that you were working with as well, weren’t you? A: Yes. It seems that the price of USD 8.4 is obviously close to the price which Rangarajan committee had referred and although this is bit higher than what we were anticipating but our concern is more from the point of the power consumers and the power sector because ultimately if there is a higher price then somebody has to pay that higher price and in power sector that will be ultimately either the state discom's or the consumers.Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
