Narendra Modi govt orders status quo on natural gas prices; $4.2 rate to continue till Sept-end

The various options before the government included applying the Rangarajan formula unconditionally from July 1. (Reuters)

SummaryGovt orders status quo on natural gas prices for 3 months

The Narendra Modi government today postponed revision in natural gas prices by three months pending a comprehensive review.
Oil Minister Dharmendra Pradhan said the current rate of USD 4.2 per million thermal units will continue till September end.
The Centre was expected to decide on implementation of new gas pricing regime in the next two days. A series of discussions have been held between the Prime Minister's office, petroleum minister Dharmendra Pradhan and finance minister Arun Jaitley since Friday.
The government was tight-lipped on the likely proposals it was contemplating to implement. A senior petroleum ministry official, when asked on when the decision is expected, said, “Wait for 48 hours.”
The petroleum ministry is of the opinion that the issue of pricing of gas would need to be seen in the context of achieving the multiple objectives of incentivising domestic gas exploration and production on the supply side and meeting the higher subsidy outgo in successive budgets for the fertiliser and power sectors.
Therefore, the gas pricing need to strike a balance between the requirements of the exploration and production sector and the burden on the government exchequer.
India's natural gas output went down to 35.4 billion cubic metres (bcm) in FY14 from 47.56 bcm in FY12.
The various options before the government included applying the Rangarajan formula unconditionally from July 1, tweak the formula, allow higher price only for incremental production over and above the current levels or completely scrap the decision of UPA government.
There are several other issues surrounding implementation of the Rangarajan formula such as whether Reliance Industries' foreign partners – BP and Niko Resources – should be allowed to charge the higher gas price for output from once prolific KG-D6 basin; whether the pricing should be on gross calorific value or net calorific value, among others.