Suresh Prabhu to head panel to review gas price

Suresh Prabhu to head panel to review gas price

Rangarajan’s formula would have more than doubled gas price to around $8.8 per million British thermal unit.

Prime Minister Narendra Modi has chosen former power minister Suresh Prabhu to review the previous UPA government’s decision to raise the price of natural gas that would have led to a cascading effect on power tariff, urea costs and retail price of piped cooking gas.

Following Modi’s directive, the petroleum ministry has moved a proposal to set up “a group of eminent persons” to assist the government in formulating “an appropriate view”, which includes the freedom to suggest an “alternative formula/pricing guidelines”.

“As discussed, the group could consist of Suresh Prabhu, Pratap Bhanu Mehta and Bibek Debroy, if they are agreeable,” says the proposal awaiting petroleum minister Dharmendra Pradhan’s approval. Mehta is president and chief executive of Centre for Policy Research while Debroy is a faculty member in the same centre.

An “indicative” terms of reference for the committee includes “revisiting the Natural Gas Pricing Guidelines of 2014 (NGPG 2014) and the Rangarajan formula and the possibility of applying the same in its present form or with modifications”.


“Observations made by Parliamentary Standing Committee would also need to be considered,” it emphasises.

Rangarajan’s formula would have more than doubled gas price to around $8.8 per million British thermal unit, raising power cost by over Rs 2 per unit, urea production cost by Rs 6,228 per tonne and piped gas by Rs 8.50 per kg.

Both Parliamentary Standing Committee on Finance and the Standing Committee on Petroleum made adverse comments on the formula approved by the UPA in June 2013. It has been challenged in the Supreme Court and an FIR is pending in Delhi’s Anti-Corruption Bureau on the issue.

The proposal says the committee would have to consider pricing regimes in other countries, production sharing contracts signed between exploration firms and the government, impact of price revision on power, fertiliser, economy and the gas demand-supply scenario, and price impact on the exploration activities.

It moots “extensive consultations with stakeholders so that their concerns can be addressed” within the legal stipulations as well analyse the possibility of a uniform gas pricing regime in the country.

The committee would be given time until August 31 to submit its report “so that the government has sufficient time for taking a view of its recommendations and to take a decision before September 30”. Within this timeline, the committee would have to invite public comments through the web as there was not enough time.

Last month, the Cabinet Committee on Economic Affairs deferred the implementation of Rangarajan price formula by three months for a comprehensive review keeping public interest in mind.