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Domestically produced natural gas pricing will be up for review on a quarterly basis, if the Petroleum and Natural Gas Ministry has its way.
The Ministry, which is holding last-minute consultations with the other Ministries concerned, such as power and fertiliser, before approaching the Cabinet Committee on Economic Affairs for review of gas pricing, feels that the price should be notified in advance on a quarterly basis, using data for four quarters, with a lag of one quarter.
Though the Ministry has based its proposal on gas pricing, as recommended by the Rangarajan Committee, it has deviated on this point, a senior Petroleum Ministry official told Business Line .
The Rangarajan panel, which looked into production sharing contracts in the petroleum industry, had suggested that gas pricing should be notified on a monthly basis. But, the Ministry felt that availability of gas pricing data from all sources, such as Indian importers and other industry sources, including international agencies, varies from a few days to a month. “If the prices are notified every month, the Government may have to rely on limited sources for computation of the price,” the official said, adding that to accommodate and reconcile the data from multiple sources, the Ministry has thought of notifying gas price only quarterly.
This is also expected to dampen the volatility in prices.
Further, the Ministry has also suggested that the ‘Natural Gas Pricing Guidelines’ be made applicable to all natural gas produced domestically, irrespective of the source.
The Ministry expects to approach the CCEA in the next 15 days. According to reports based on the formula suggested by the Ministry, the price will be $6.775/mmBtu. However, the Power Ministry feels that any price beyond $5/mmBtu will be unviable for the sector.
Currently, domestically produced gas is sold in the range of $4.2-$5.75/mmBtu, spot (imported gas) at $13-$14/mmBtu and long-term contract $11.5/mmBtu. These prices are excluding local taxes and add-ons like marketing margins, transportation tariff.
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