Macro Economy

Oil Ministry looks to PMO for guidance on gas pricing

Our Bureau New Delhi | Updated on November 25, 2017 Published on June 05, 2014

A file picture of Reliance's KG D6 platform. Clarification on the applicability of the new price is awaited.

New price must be decided before July 1

The Petroleum & Natural Gas Ministry has said clarity on ‘new price for domestically produced gas’ is expected early next week.

“A decision has to be taken before July 1…we have already informed the producers such as Reliance Industries in April that the earliest possible date for applying the new gas price is July,” a senior Ministry official said.

The Ministry expects to get some guidance after its presentations to Prime Minister Narendra Modi. Since the entire pricing has been approved by the Cabinet, any further adjustments will require its nod.

Clarifications on two crucial issues – method of price calculation and the applicability of the new price to D-1 and D-3 gas fields of the Reliance Industries-operated KG-D6 block – are required.

The Ministry is required to notify the price for the July quarter within the first fortnight of June. The new price based on the earlier Cabinet decision was to come into effect from April 1, 2014. But, political issues and then the general elections had resulted in the Election Commission asking the Ministry to defer notification of the new rates.

The new price, which is expected to be almost double the current rateof $4.2 a unit (million British thermal units), was based on the recommendations of the Rangarajan panel. But differences had cropped up between the buyers (fertiliser companies) and seller (Reliance Industries-BP-Niko) on the price calculation.

Whether the calculation will be based on the gross calorific value (GCV) or net calorific value (NCV) needs to be clarified. The high-level panel had wanted it to be on NCV, but the global practice is to use GCV. The heat produced from natural gas is measured in calorific value.

Auto, cooking gas price

Continued sale of domestic LPG and kerosene at subsidised rates is a cause of concern. “A final view has to be taken…the Ministry will approach the Cabinet Committee on Political Affairs,” the official said. The issue of subsidy will also be a part of the presentation to be made to the Prime Minister, the dates for which are yet to be announced.

The Ministry also proposes to tweak the new production sharing contracts that will be inked with the winners of oil and gas blocks offered through auctions.

“The contracts need to be made more flexible, the DGH needs to be more empowered, and policy for marginal/ mature fields needs to be put in place, to make exploration and production of oil and gas more attractive,” the official added.

Published on June 05, 2014
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