Media reports suggest that the union petroleum ministry wants the government to adopt the pricing formula for natural gas proposed by the Rangarajan Committee.
Specifically, the ministry wants the pricing formula to apply to all forms of natural gas – conventional, shale and coal-bed methane (CBM). Also, the ministry proposes to apply the price to all consuming sectors uniformly.
In this regard, the ministry has reportedly circulated a draft cabinet note. According to the note, the ministry wants the new pricing guidelines to apply from 2013 itself on all domestically produced gas barring cases where it is either governed by a definite formula prescribed in the Production Sharing Contract (PSC) or the government had previously fixed a tenure for the same.
This essentially meant that RIL would get the new price only from April 1, 2014 upon expiry of the fixed five-year term of current rate of $ 4.205 per million British thermal unit.
It may be recalled that the Rangarajan Committee recommended pricing domestically produced natural gas at an average of international hub prices and cost of imported LNG instead of the present mechanism of market discovery.
If the proposal of the oil ministry is accepted, reports suggest that the the price of natural gas produced by state-owned ONGC and OIL may double to $8-8.5 per million British thermal unit in the current year itself and for Reliance Industries from April 2014.
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