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Govt considers change to setting natural gas price

Zheng Yangpeng
Updated: Oct 22,2015 9:41 AM     China Daily

The government could shorten the time between adjusting natural gas prices to better reflect domestic market fundamentals, an official from the top economic planner said on Oct 21.

But Hu Zucai, vice-chairman of the National Development and Reform Commission, did not signal if a price cut is on the way.

Price adjustments have been made annually under a scheme launched in July 2013. The last time prices were adjusted was on April 1, effectively merging a two-tier pricing system into one to track an oil market slump.

Yet, the last price cut did not fully reflect falls in substitution fuels to which regulated gas prices are benchmarked. This has curbed gas use by factories and slowed the shift from diesel and gasoline to gas in vehicles.

“Next we’re studying (whether) to shorten the periods,” Hu said at a news conference.

China is the world’s third largest consumer of gas, but consumption has dropped in line with a cooling economy.

Under the policy, Chinese industrial users are paying among the world’s highest prices, especially when compared to oil. Price adjustments in the oil and gasoline sectors have already been shortened to 10 days from 22 days.

This has helped the government and industry react to volatility in the global crude market. Business are now hoping for a similar shorter period when adjusting gas prices.

There has even been speculation during the past few months that wholesale gas price will be cut by up to 30 percent, which was denied by Hu.

“Now that the adjustment mechanism has been set up, it should work,” Hu said, adding that the regulator was also unlikely to adjust gas prices for residential use in the near future.

But Beijing could expand tier-pricing reform to residential customers. This would eventually lower subsidies and prevent wasteful use, officials said.

On Oct 21, the NDRC also released the revised version of the government’s price catalog. Beijing previously controlled 13 categories and the cost of 100 items. This has been sharply cut to seven categories and 20 items from Jan 1, 2016.

Prices still regulated by the government include electricity, special drugs, railway ticket pricing and postal service. Beside the change in the government price catalog, many more items will be regulated by local authorities. The NDRC has already approved local versions of the price catalog from 30 provinces. The lists will be publicized soon.