EGoM has no power to decide gas prices

The Cabinet Secretariat last month returned the ministrys proposal saying that the new pricing formula for all domestically produced natural gas,as proposed by the Rangarajan Committee,was not covered under the EGoMs terms of reference.

As the… EGoM is mandated to consider and decide issue of commercial utilisation of gas (produced from blocks) under New Exploration Licensing Policy (NELP) and other related matters,the present proposal will not be covered by the mandate of the EGoM, said the Cabinet Secretariat. In this light,this ministry may… either forward a proposal for expanding the terms of reference of the EGoM or bring a note… for the consideration of the Cabinet Committee on Economic Affairs, it said.

The EGoM note had proposed that the Rangarajan pricing guideline would be applicable to all natural gas domestically produced,irrespective of the source whether conventional,shale,coal bed methane etc. The need,it said,was to bring about a policy framework to fix gas price uniformally and rationally.

It said that the new price as computed by the Rangarajan Committee would be $7.295 per million British thermal units (mBtu).

Besides gas from NELP blocks,the ministrys proposal suggested this price hike on gas produced by ONGC and Oil India from blocks nominated to them before NELP. Their price is administered at $4.2 mBtu per since June 2010. The new tariff was also to be levied on gas from discovered fields like Panna and Mukta ($5.73),Ravva ($3.5) and Tapti ($5.57) as well as small-sized discoveries. The Cabinet Secretariats objection would come as respite to the two user ministries fertiliser and power and the subsidy-bearer department of expenditure who strongly contested the new pricing formula.

While the power ministry feared that the price increase would make power projects unviable,the fertiliser ministry warned that the change would impact the urea subsidy outgo. The expenditure department had said that the committees formula lacked justification.