India has accepted the proposal seeking a hike in the price of gas supplied by Oman to the Oman India Fertilizer Company (OMIFCO) urea plant in Sur to US$1.5 per million metric British thermal unit (mmBtu) this year, according to Indian media reports.
Indian newspapers, quoting unnamed official sources, said on Friday that the India cabinet has cleared the proposal to accept the hike in the price of gas supplied by the Oman government to US$1.5 per mmBtu from this year with an annual increase of 50 US cents per mmBtu up to a maximum of US$3 per mmBtu.
The proposal was moved by India's fertiliser ministry as the change in the agreement between the two countries required cabinet approval.
The Indian government has dropped the idea of challenging the rise in gas prices at the International Tribunal in London, sources said.
Oman had contracted to sell gas to OMIFCO at 77 cents per mmBtu for 15 years from 2005, but mid-way through decided to hike rates to US$3 per mmBtu from January 1, 2012, citing firming up of prices in the global market.
OMIFCO, a joint venture between Oman Oil Company and Indian co-operative firms KRIBHCO and IFFCO, produces about 2mn tonnes (MT) of urea a year at the Sur plant for export to India. However, in February this year, OMIFCO launched two bagging units at the plant to supply 30,000MT annually in the local market from this year.
Indian media reports also said that, as per the Indian fertiliser ministry's proposal, after the price of gas touches US$3 per mmBtu, the annual escalation in fuel rates would be equivalent to the yearly US inflation rate or three per cent, whichever is lower.
The fertiliser ministry was in favour of accepting the hike because even at US$3 per mmBtu, the gas supplied by Oman is cheaper than alternate fuel sources. Long-term gas supplies in the international market are no less than US$18 per mmBtu.
© Muscat Daily 2012
