New govt to decide gas price hike

Consumers can heave a sigh of relief as the price of natural gas will not see a revision at least till the Lok Sabha elections are over.

In pursuance of an Election Commission order, Oil Minister Veerappa Moily on Friday approved the existing rate of $4.2 per million British thermal units (mmBtu) for the sale of natural gas in India until a new government takes over in May and decides on implementing the Rangarajan formula, which was pending before Parliament.
The Rangarajan formula proposes using an average of the US, Europe and Japanese hub prices and combining this with the net-back price of imported liquefied natural gas (LNG) to establish the sale price of domestically-produced gas. The implementation of this formula, which was cleared by the union cabinet, is now stalled.

 Consequently, Reliance Industries Limited (RIL) will continue to sell natural gas from its eastern offshore KG-D6 fields at the current rate until a revision in price. The gas prices were going to be doubled from April 1, according to an earlier government decision. The delay will not have a material bearing on 85 per cent of the gas produced in the country as firms such as ONGC can continue sales at $4.2 per mmBtu on existing contracts.

However, new contracts needed to be signed for KG-D6 as RIL's current sales pacts expire at the end of the month.

Sources said RIL and buyers of its KG-D6 gas settled most issues on the new sales pacts after a meeting called by the oil ministry.

Urea plants had flagged about 10 issues, including the duration of the contract and supplier liabilities, in the new Gas Sales and Purchase Agreement (GSPA) that RIL had proposed starting April 1.

"Most of the issues have been resolved, barring one or two," said a ministry official.
RIL agreed to a five-year validity for the new GSPA, like the current one. It previously offered 3-month contracts in line with a new gas pricing policy, where rates would have changed quarterly.