The Ministry for Petroleum & Natural Gas is looking for a middle path to end the uncertainty on the new price for domestically-produced gas.
“Some clarity should emerge in a day or so on the formula to derive a price which is acceptable to all stakeholders — consumers as well as producers,” a senior Government official said.
“Today the situation is that of being caught between the devil and the deep sea. It is not easy for the Government to completely dismiss the formula suggest by the C Rangarajan panel if it does not have in place another mechanism,” said another official privy to the developments.
“The Rangarajan formula with some changes is a possibility,” he said. The formula, if implemented, will almost double the gas price from the current $4.2/unit (gas is measured in million British thermal units). Meanwhile, the Ministry has informed the producers to continue selling gas at the prevailing rates till any further decision is taken.
The Petroleum & Natural Gas Minister, Dharmendra Pradhan, told BusinessLine that the method adopted by the previous regime is not the way a policy is framed. On the Rangarajan formula, he said, “It takes into account Japan’s consumption, EU’s balance sheet and the Henry Hub price, when the gas is in the country.”
According to an official in the Ministry, the problem emerges from the use of words ‘arm’s length’ and ‘valuation of price’ in the production sharing contract (PSC). Besides, deferment of the decision by three months has led to even those who are not directly connected with the subject giving their two bit advice on the issue, the official added.
On June 25, the BJP Government bought some more time to decide on the politically sensitive issue of fixing a new price for domestically-produced gas.
The issue also became contentious as the dispute with private sector major Reliance Industries and its partners in the country’s largest gas fields still remained unresolved.