AOGO wants govt to move to free pricing regime early

The Association of Oil and Gas Operators (AOGO) opined that the government must move to a free market-based pricing regime for natural gas.

In a statement, the industry body of the upstream oil and gas sector said future investors shall be willing to take the risk of lower prices, as long as the free market principles and non interference by allocation are observed.

Welcoming the move by the CCEA to clear the proposal for doubling the domestic natural gas price, AOGO
said this change of approach was long overdue, and is to be commended.

It may be recalled that the CCEA decided to price domestic gas at an average cost of imported LNG and international benchmark prices. The rates as per this formula will be around $8-8.2 per million British thermal unit in April as against $4.2 currently.

But it also said that the announcement falls short even of what the panel headed by Prime Minister’s economic advisor C Rangarajan had suggested.

Removal of spot prices from the formula reduces the volume and the correct reflection of imported LNG cost thus affecting domestic producer’s price, AOGO said.

The government announcement after the CCEA decision “is silent on this, AOGO said, adding that a Vijay Kelkar committee is looking at the transition issues, and its report should be with the government in a few months.

AOGO strongly hopes that the transition to free market shall start within next year and shall be completed within the 5 year time span, the statement said.