Government ready with natural gas pricing formula, says Deora

Mumbai: The government will soon approve a formula for calculating the price of natural gas. Private producers like Reliance Industries will need government approval for the formula used to calculate the price of the fuel, petroleum minister Murli Deora told the Rajya Sabha.

"Formula on the basis of which gas pricing is done... shall be approved by the government," Deora said.

The valuation of gas would be based on the most recent competitively determined price in the region duly indexed to the present, said minister of state for petroleum and natural gas Dinsha Patel.

Deora said his ministry had set up a committee headed by joint secretary and financial adviser to the petroleum ministry to recommend transparent guidelines for pricing gas which would then be the basis of calculating government revenue from gas fields (profit petroleum and royalty).

The committee was constituted after the ministry rejected the Mukesh Ambani-controlled Reliance Industries' proposal to sell gas from its KG-D6 fields in the Bay of Bengal to Anil Ambani's company saying the price of $2.34 per million British thermal unit (mBtu) was not arrived at arms-length basis.

"The committee being a departmental one and entrusted with the task of valuation of government take under the production sharing contracts (PSCs), did not include members of other ministries," he said.

He said the committee had sought the views of various stakeholders across different sectoral industries and users before arriving at a pricing formula.