C Rangarajan headed panel, was tasked to suggest design of future contracts for exploration and production of oil and gas. Rangarajan is the Prime Minister’s Economic Advisory Council Chairman. The committee is believed to have suggested a complex pricing formula that will lead to near-doubling of the natural gas price to about $8 (Rs 439).
However, it is unclear if this will override the price discovery mechanism set out in current oil and gas contracts. The six-member panel, which gave its report to the Prime Minister’s Office on December 20, is believed to have suggested pricing of natural gas based on the weighted average of the fuel in North America, Europe and Japan as well as imported liquefied natural gas ( LNG).
Sources said the panel had suggested bringing gas-on-gas competition in five years. That will essentially means deregulation of the sector. In the run-up to that, the panel wanted domestically produced gas to be priced based on a complex weighted average formula.
The formula translates into a gas price of just over $8 a million British thermal unit (mBtu) compared to the current rate of $4.2 (Rs 215) an mBtu for most of the gas produced in the country.