Moily asks Kelkar to suggest roadmap for freeing gas prices

Oil Minister M Veerappa Moily has asked the Vijay Kelkar panel on energy security to suggest roadmap for freeing natural gas prices by March 2017.

Moily expanded the terms of reference (ToR) of the panel he appointed in March to prepare a roadmap for enhancing domestic production of oil and gas so as to substantially reduce the nation's import dependency by 2030.

In the new ToR, the panel has been asked to prepare a "Roadmap for switching over to the market determined gas pricing at the end of 12th plan period."

Currently most of the gas produced in the country is sold at sub-market price of $4.2 per million British thermal unit and the Oil Ministry has approached the Cabinet for raising it by over 60% to $6.775 as per a complex international hub and LNG price based formula suggested by Prime Minister-appointed Rangarajan panel.

This new price will be roughly half of the market price.

While Rangarajan panel had suggested freeing of gas prices in 3-5 years, Moily now wants Kelkar panel to clearly spell out a roadmap leading to that.

The panel headed by former oil secretary Kelkar has also beeing asked to "give views on the recommendations of Rangarajan Committee on Moving from Production Sharing Contracts to revenue sharing contracts."

Rangarajan panel had recommended that companies should be asked to bid upfront the amount of oil and gas they will share with the government for award of exploration acreage.

This will replace the current practice of companies getting blocks by bidding maximum work programme and then recovering all of their investment before sharing profits with the government. This model was criticised by CAG which said it encouraged companies to keep raising cost so as to postpone higher share of profits to the government.

India currently imports 80% of its oil needs and about half of its natural gas requirement. Moily had in the previous ToRs of the committee wanted to cut down reliance on imports to half by 2020 but in the new ToRs the panel has been asked to suggest "steps to be taken for enhancing oil and gas production from the unconventional as well as conventional energy sources."

Also, it has been asked to suggest "institutional mechanism for appraisal of the Indian sedimentary basins to the extent of 75% by 2015 and 100% by 2025."

It will also recommend "steps to be taken for development of gas transportation infrastructure for establishing countrywide market place."

The committee has been asked to submit its reports in six months.

The panel has been asked to suggest "utilisation of Oil Industry Development Board (OIDB) cess and other innovative resource mobilisation approaches for appraising the unexplored /partly explored acreages and development and promotion of Indigenous service industry in E & P sector."

It would also review institutional mechanism for acquisition of oil and gas assets abroad as well as pursuing diplomatic and political initiatives for import of gas from neighbouring and other countries with emphasis on transnational gas pipelines.

Besides, steps to be taken for ensuring adequacy of finances for R&D required for building knowledge infrastructure in E&P activities and steps to be taken for development of gas transportation infrastructure for establishing countrywide marketplace are also included in its terms of reference.