Pooled gas pricing unlikely; fertiliser sector could be exception

The Centre is unlikely to go in for a ‘pooled' price for natural gas delivered to consumers either at an aggregate level or even for individual sectors, barring fertilisers.

Simply, pooled price means a basket of gas from different sources at varied prices, sold at a single weighted average price. Currently, consumer gas price in the country ranges from $2/mBtu to $14/mBtu (excluding transport levies and taxes).

An Inter-Ministerial Committee under the Planning Commission Member, Mr Saumitra Chaudhuri, has argued against “any form of pooling at the all-India level cutting across industries”. The only exception could be fertilisers, where there is already a proposal before the Cabinet Committee on Economic Affairs for a notional gas price pooling mechanism to be operated through the Fertiliser Industry Coordination Committee (FICC) in the Department of Fertilisers.

Though gas prices are inching towards market determined rates, the Indian market still remains price sensitive.

D6 gas price review

The price for the gas from the country's largest gas fields — D6 — will also be up for review. The current price of $4.2/mBtu (at land fall point) was discovered in 2008 and is applicable for five years.

The Committee on Policy for Pooling of Natural Gas Prices and Pool Operating Guidelines was asked to examine the procedure for discovery of gas price.

While refraining from suggesting a viable scheme for pooling of gas prices, it has focused its attention on preferential allocation of domestically produced natural gas to the fertiliser and power sectors with a certain reserved quantity for piped gas, CNG and other Court-mandated consumers.

Most of the upstream companies have expressed reservations about the price discovery mechanism as it would operate in the pooling scenario. The pools do not have any control over the international LNG price and to get the benefit they would like to keep the domestic prices at much lower levels than the imported gas.

This, they felt would be detrimental to the interest of upstream producers and indigenous developments.

In its report submitted last month, the committee has said that it “does not recommend pooling mechanism for natural gas at the overall level, nor does it recommend a price pooling on sectoral basis, except where that may be found to be the best workable option”.

In the case of fertilisers, such a ‘workable option' already exists through the FICC, which maintains accounts for making subsidy payments to and for recovering amounts from fertiliser companies.

In the case of pooling, those now paying more than the common price would be entitled to receive a payment, while those whose gas price is below the weighted average will make a corresponding pay-in.

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