Different departments of the government has different view on the proposed pricing formula for domestically produced natural gas.
Earlier, a panel led by C Rangarajan, the Chairman of the prime minister’s economic advisory council, recommended that gas prices in India should be calculated on the basis of international benchmarks in Japan, the US and the UK as well as prices in gas exporting countries.
This would almost double the prevailing price of $4.2 per unit that is charged by Reliance Industries (RIL) and most of the output of state-run ONGC.
However, the Planning Commission wants the proposed formula to be modified because of its linkage with benchmarks such as Henry Hub of the US.
Since the US market does not allow exports freely, US natural gas is, therefore, artificially under-priced, the commission reportedly argues.
On the other hand, the fertiliser ministry is against any formula that can substantially raise gas prices and consequently increase government’s subsidy burden. Instead, the ministry suggested factoring in cost of production by state energy firms in the proposed formula.
The power ministry has demanded to de-link domestic gas rates with volatile dollar denomination, especially when the entire output is consumed within the country and suggested that its price should be fixed by independent regulator.
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