New natural gas pricing formula to be ready by 30 September

13 Aug 2014

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The new formula for pricing natural gas is expected to be in place by September-end and the government will keep in mind the interests of both the investor and the consumer in arriving at the new price, minister for petroleum and natural gas Dharmendra Pradhan said.

Replying to questions in Rajya Sabha, the minister said the NDA government decided to review the pricing formula keeping in mind public interest and recommendations of the Parliamentary Standing Committee.

The minister did not give details, but said the decision will be taken keeping in mind the interests of both investors and the public.

Pradhan noted that the pricing of natural gas under the 'Domestic Natural Gas Pricing Guidelines, 2014' has been a "contentious issue".

Two public interest litigations (PILs) have been filed in the Supreme Court and an FIR is pending in the Anti-Corruption Bureau, Delhi over the gas pricing issue.

Besides, Pradhan said, the Parliamentary Standing Committee on finance and the Standing Committee on petroleum have both made adverse comments over the government's decision to double gas prices under the new pricing formula.

"Considering these and other factors the government decided in the CCEA meeting held on June 25, 2014 that the whole issue of gas pricing needs comprehensive re-examination,'' he said, adding, the government has since ''directed that the Domestic Natural Gas Pricing Guidelines, 2014 will be kept in abeyance up to September 30, 2014 and till that time, the domestically produced gas continue to be priced at the rate prevailing on March 31, 2014.".

The minister, however, replied in the negative to a query if a committee has been constituted for determining the alternative formula.

The previous government had in December last year decided to price all domestic gas from 1 April 2014 according to a formula suggested by the Rangarajan Committee, which nearly doubled the price to around $8.4 per million British thermal units.

The formula was notified on 10 January but as the general elections were declared before a new rate could be announced, the issue was left for the new government to decide.

The new government on 25 June decided to defer the implementation till September-end to hold wider consultations.

The existing gas pricing under New Exploration Licensing Policy (NELP) was approved in 2007 and was to remain valid up to March 2014.

The Rangarajan formula, approved by the UPA government, would lead to a jacking up the production cost and prices of fertilisers, electricity and CNG.

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