Double Nelp gas price to $8, says Rangarajan
Come March 2014, Reliance Industries and public sector ONGC and OIL will be able to sell their domestically-produced natural gas at the average global price at which India imports the fuel, excluding certain incidental costs, if the government accepts the recommendation of a panel led by Prime Minister’s Economic Advisory Council’s chairman C Rangarajan.
This means a jump in the price of a substantial amount of gas produced in the country from $4.2 per million British thermal unit (mmBtu) now to slightly under $8. About 37% of the 114 million cubic metres of the commodity produced in 2011 was from blocks licensed under the new exploration and licensing policy (Nelp), the pricing of which the panel reviewed. India imports more gas than what it produces at two-three times the regulated local price. Companies are still not satisfied with the pricing formula suggested by the panel as transportation and liquefaction costs of imported gas that are proposed to be excluded from the domestic gas price account for roughly $4 per mmBtu.
The panel did not mention any specific price, but when asked what could be the price based on the formula suggested by the panel, Rangarajan said that it could be slightly below $8.
The committee, which gave its suggestions to Manmohan Singh recently, said such a global average price may be interpreted as an “arm’s length competitive price” that producers like RIL may charge.Gas is sold at arm’s length price based on a government-approved formula to industrial customers
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