A five-point oil & gas reform agenda for new government

Diesel and gas price hike, LPG reforms, subsidy sharing formula need to be tackled on priority basis

The BJP government has at least five point agenda- diesel price hike, LPG reforms, gas price hike, subsidy sharing formula and clarity on the E&P reforms---for the upstream, midstream and downstream sector that it needs to maintain the reform momentum of the India oil and gas sector.

"A clear majority would rather encourage the government to fast forward de-regulation process through more frequent hikes (fortnightly or weekly). It can be more or less implied that de-regulation is for sure," said ICICI Securities in a report.

The industry is also expecting that the NDA government may consider lowering the cap on LPG cylinders back to nine, which was successfully implemented by the oil marketing companies in FY14.

A key decision that everyone is awaiting is the increase in gas price which would provide a roadmap towards free pricing.

The upstream industry is hopeful of that the new government would take a serious look at the subsidy sharing formula."The UPA II government was close to implementing this (proposing US$65/bl net realisation for ONGC/OIL). The NDA government might choose to implement this by 2Q FY15, after taking stock of OMCs' under-recovery trends," said ICICI Securities.

The industry also awaits clarity on  E&P reforms and expects the government to stick to Kelkar committee recommendations of continuing with the cost recovery mechanism, (as echoed by all the E&P majors).