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Fertiliser makers have pitched for the continuance of the existing domestic gas pricing mechanism.
Opposing the recommendations of the Rangarajan Panel on production sharing contract, the Fertiliser Association of India has said the existing formula for calculating the price of gas from the Reliance Industries operated KG-D6 block may be followed.
The FAI said the existing formula was suggested by the gas producers, approved by the Government and accepted by the consumers like the fertiliser makers. The existing formula is linked to the crude oil price. It stipulates a ceiling of $60 per barrel on the crude price. The FAI said the ceiling may be removed and allowed to float with monthly price of Brent crude. The Indian crude basket is currently traded at $114 a barrel.
The Rangarajan Panel has suggested a gas pricing formula based on the average of two prices — price at other producing destinations and the volume-weighted price of US’s Henry Hub, UK’s NBP and Japan Custom Cleared (on net-back basis, since it is an importer)
“If another formula has to be worked out, then the cost of production for domestic gas should have at least 50 per cent weightage in the new formula. The other 50 per cent should exclude the price of imported LNG into Japan and take a weighted average of price of the domestic gas traded in the US and Europe,” FAI Director General, Satish Chandra said in a statement.
Vishwanath.kulkarni@thehindu.co.in
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