Domestic gas prices may be fixed at $2 lower than the $8.8-per-unit price discovered by the Rangarajan commitee constituted to suggest changes in the production-sharing contract and future domestic gas-pricing mechanism.
Sources said the oil ministry agreed to the basic principle of gas pricing suggested by the panel, but wants it to be modified slighty to also take into account gas prices in countries such as Malaysia, Saudi Arabia, Qatar and Nigeria that account for a major portion of India’s liquified natural gas imports.
This is expected to bring down the price of domestic gas in the range of $6.5-7.5 per million Brtish thermal units (mmBtu) once it is revised, much to the relief of power and fertiliser sectors that have already raised their concerns over the high gas prices suggested by the Rangarajan panel.
The ministry, in its note for the empowered group of ministers on gas pricing and allocation, has also presented three scenarios for changing the priority order for allocation of gas.
It has said that gas allocation could either continue with the existing priority order, or this could be changed to give equal priority to all consumer sectors, or the government could bring power sector at par with the fertiliser sector for allocation, meaning both share the available domestic gas equally.
While a final call on the issue is expected to be taken when the eGoM meets later this month, sources said that last option of gas allocation has been favoured as it would be more beneficial in national interest.
“The proposals on gas pricing and priority order has been kept open so that the EGoM takes a holistic view of the prevaling conditions to arrive at a decision. While the final proposal on deciding priority order for gas allocation has already been sent to EGoM, the ministry is finalising its recommendations on gas prices based on revisions to the formula proposed by Rangarajan committee,” said an official in the oil ministry asking not to be named.
The EGoM meeting, which was scheduled for May 7 to discuss raising prices of gas produced by blocks auctioned under new exploration licensing policy (Nelp) and allocation of gas produced from other blocks, has been deferred and is now expected sometime later this month. NELP gas is currently produced from Reliance-operated D6 block, while GSPC and ONGC are at an advanced stage of developing their gas fields.
It is understood that the oil ministry sought more time to finalise its view on gas pricing before seeking a decision from the group.
“The oil ministry is of the view that domestic gas prices in the country should take into the account the price of gas in countries from where India imports the fuel. This would bring the domestic gas prices to a more realistic level than one that is finalised on the basis of gas prices in major exporting countries that have negligible supplies to India,” the official added.
The Rangarajan panel arrived at a base gas price of $8-8.8 based on average of net back LNG price (price excluding ocean freight, transportation cost and duties), including term and spot contracts being imported into the country, price of US’ Henry Hub, UK’s National Balancing Point and Japan Custom Cleared LNG prices.
OIl ministry feels that this formula needs to give more weightage to price of LNG imports by India as other pricing indices are from countries that are big exporters of gas while India largely imports gas.