Complex gas pricing formula that will double rates suggested by Rangarajan panel?
The Rangarajan Committee is believed to have suggested a complex pricing formula that will lead to near doubling of natural gas price to about USD 8.
However, it is unclear if this will override the price discovery mechanism set out in current oil and gas contracts.
The six-member panel, which submitted its report to the Prime Minister's Office on December 20, is believed to have suggested pricing of natural gas based on weighted average of the fuel in North America, Europe and Japan markets as well as imported liquefied natural gas (LNG).
Sources said the panel has suggested bringing gas-on-gas competition in five years, which essentially means deregulation of the sector. In the run-up to that, it wanted domestically produced gas to be priced based on a complex weighted average formula.
The formula translates into a gas price of just over USD 8 per million British thermal unit compared to the current rate of USD 4.2 per mmBtu for most of the gas produced in the country.
The panel headed by Prime Minister's Economic Advisory Council Chairman C Rangarajan was tasked to suggest design of future contracts for exploration and production of oil and gas as well as basis or formula to price domestically produced gas.
Sources said it was unclear if the suggestion of the panel can override the arms-length price discovery set out in the Production Sharing Contracts (PSCs) signed by companies like Reliance Industries.
Under current PSC, a contractor is required to discover an arms length price of gas by calling bids from prospective
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