As the Union government hiked gas price on June 28 will benefit a lot the government-owned Oil and Natural Gas Corp (ONGC) and private major Reliance Industries (RIL), power and fertiliser companies will see their fuel costs shooting up substantially. As the power industry, a major consumer of natural gas, operates on the principle of pass-through of fuel costs to consumers, Indian consumers will have to shell out more for electricity, say analysts.
India Ratings and Research said in its report that the fuel cost per unit for natural gas-based power generation could increase by 56 per cent to Rs 3.41 per kilowatt hour (kwh) if domestic gas prices were to increase to $6.77 per million British thermal unit (mBtu) from the current $4.2 per mBtu.
With the Cabinet approving a higher price of $8.4 a unit, this will further hit the power producers which will ultimately pass on the fuel hike to consumers. This would manifest itself as an increase of 9 paise per kwh on the total Indian power generation of 912 billion kWh, which would lead to an additional burden of Rs 7,800 crore towards gas costs on the gas-based power generation of 65 billion kwh.