The Hindu Business Line : Gas pricing issue referred to Secretaries panel

New Delhi June 25 The issue of pricing of natural gas from the east coast has been referred to a Committee of Secretaries (CoS). According to sources, the Prime Minister's Office has referred the issue to the committee. The CoS is likely to have secretaries of petroleum, power, fertiliser, law and finance among others as its members.

The decision comes in the backdrop of the Petroleum Ministry favouring a market determined price for Krishna Godavari gas, while the power and fertiliser ministries, as well as the Andhra Pradesh Government, voicing reservations over the methodology being adopted for arriving at the price.

The two ministries and State Government wanted the gas prices to be affordable to power and fertiliser companies as well as other consumers.

RIL's pricing

The whole issue came into the news after the Mukesh Ambani-led Reliance Industries Ltd submitted a gas price formula for its KG gas to the Ministry for its consideration. RIL was expecting to firm up the formula by next month, as it was looking at starting gas production from its KG Block in July 2008, and a formula has to be in place a year prior to production. However, some of the consumers as well as the Anil Ambani group have objected to the formula.

RIL's gas will cost between $4.4 and $4.6 per million British thermal unit (mBtu) at Kakinada. This price excludes the marketing margin, transportation tariff and four per cent Central Sales Tax. According to sources RIL's formula links the price to Brent crude oil price, with a floor of $25 per barrel and a cap of $65 per barrel.

The price will be calculated based on a year's average of Brent crude oil price. The ADA Group's Reliance Natural Resources Ltd has questioned the high floor price for gas from the KG basin.

Meeting postponed

Meanwhile, the scheduled meeting of the Energy Coordination Committee headed by the Prime Minister, Dr Manmohan Singh, which was expected to take place on Tuesday to review natural gas scenario in the country would now meet on July 12.