Natural gas producers asked to fix price through competitive bidding

08 June 2007

Mumbai: Reliance Industries and other companies, which plan to produce natural gas from the Krishna Godavari (KG) basin from 2008, will have to discover their prices through bids from consumers under a new policy adopted by the government.

The new policy is on the lines of the recommendations of a committee that prescribed price discovery through competitive bidding, the ministry of petroleum and natural gas said in a press release.

The ministry has accepted the recommendations of the committee headed by its joint secretary and financial advisor. The committee was constituted to formulate transparent guidelines for approving natural gas price formula for giving government approval.

"Once a market-determined price has been discovered between the suppliers and customers through a transparent competitive bidding process, there should be no need for the government to interfere with the same," it said.

In cases where price is not determined through a transparent bidding process, it would be indexed to the most recently competitively determined price in the region, it said.

Reliance is to start production of natural gas from the KG-DG block off the Andhra coast from July 2008 and has not yet firmed up the gas sale price.