A petroleum ministry official said Friday the prices of indigenously produced natural gas have been hiked, a move that is bound to affect major industries.

Petroleum Minister Mani Shankar Aiyar declined to confirm the decision, apparently taken at a cabinet meeting, saying only Finance Minister P. Chidambaram was authorized to speak on the subject.

Aiyar's officials revealed that the decision to increase the prices of natural gas was taken May 19.

The decision will marginally affect power, fertiliser and small industries as they will face a lower hike, official sources said.

"In the case of small industries in Agra and Ferozabad that utilise up to 50,000 cubic metres of gas per day there would be no hike for three to five years but in the case of major industries it has been decided to charge market determined prices," a senior official said.

"The price of natural gas is being raised from Rs.2,850 per thousand standard cubic metres to Rs.3,200 per thousand standard cubic metres for the power and fertiliser industries," the official said.

This will mean that while power and fertiliser units would face a 12 percent hike in prices, in the case of major industries the charges would be 147 percent more as the market determined price of natural gas is about Rs.7,050 per thousand cubic metres.

In comparison, the prices of regassified LNG is more at Rs.7,200 per thousand cubic metres.

The government move is expected to considerably enhance the revenues of Oil and Natural Gas Corp (ONGC), the largest producer of indigenous gas.

"We are still to calculate the impact," said A.K. Balyan, director human resources at ONGC.

ONGC revenues are expected to rise by Rs.10 billion annually with the government permitting it to levy rates closer to the market determined prices being charged by private exploration companies as in the case of Panna-Mukta-Tapti.

It is still to be seen how higher gas tariffs would impact the retail price of power and fertiliser once the new fuel price comes into effect.

In the case of fertilisers, the government has been extending sizeable subsidy to protect the farmers. The hike in gas prices may well translate into higher government subsidy burden, particularly in the case of the fertiliser industry.