Panel to suggest alternative gas pricing

The panel will be headed by former power minister Suresh Prabhu

The gas price committee likely to be formed by the government could hold a workshop with stakeholders on the possible guidelines.

The panel’s recommendations would overwrite the controversial Rangarajan formula that had favoured doubling of natural gas prices from the current $4.2 per million British thermal units (mBtu). The committee’s modalities include holding workshops and inviting comments through the internet for preparation of its final report, sources said.

Its report could come by August 31, allowing the government a month to announce the new pricing formula and the reviewed guidelines by the deadline of end-September. The panel would also consider the observations made by Parliament’s standing committee on the sector, apart from the contractual and legal requirements if an alternative to the Rangarajan formula is suggested.

According to the latter formula, gas prices were to be revised every quarter. The higher rates would have raised the cost of power by about Rs 2 a unit, urea production cost by Rs 6,228 a tonne, piped gas by Rs 8.5 a kg and compressed natural gas by Rs 12 a kg.

The committee is likely to have as members former Union power minister Suresh Prabhu, Pratap Bhanu Mehta, head of the Centre for Policy Research, and Bibek Debroy, also from the latter body.

However, Petroleum Minister Dharmendra Pradhan, on the reported move by his ministry to set up such a committee, said: “These are mere speculations.”

The earlier government had on January 10 notified a new domestic gas pricing formula based on the Rangarajan recommendations. General elections were announced before the new price could be announced and the Election Commission asked that the decision be left to the next government. The revision of rates was put off to July 1. The new government on June 25 decided to defer a decision until October, pending wider consultations.

The committee might consider the issue keeping in mind the pricing regimes in various countries, provisions of production sharing contracts like the one for Reliance Industries' KG-D6 block, impact on other sectors such as power and fertiliser and on exploration activities.