Paves the way for a new policy after CCEA approval

The Law and Justice Ministry has favoured a stable, five-year gas pricing formula, and also advocated a single price for all sources of gas. This would be put into effect from April 1, 2014, after approval of the Cabinet Committee on Economic Affairs (CCEA).

Instead of a phased gas pricing regime, as suggested by the Planning Commission and the Petroleum Ministry, the Law Ministry has strongly pitched for a single pricing, five-year stable regime. This approval paves the way for bringing the gas pricing policy before the CCEA after completion of the inter-Ministerial consultations. These consultations are currently going on.

The Petroleum and Natural Gas Ministry has informed the Law and Justice Ministry to shift to market-determined gas pricing regime by the end of the 12th Plan (2016-17). “The roadmap for switching over to market-determined gas pricing at the end of the 12th Plan period is being worked out separately by the Kelkar Committee, and would be placed before CCEA in due course,” the Law Ministry has stated in its legal opinion given to the Petroleum Ministry on June 6.

A CCEA note circulated to all Ministries stated that the objective is to frame guidelines for pricing of domestic natural gas based on the methodology suggested by the Rangarajan Committee . The guidelines will be applicable to all natural gas produced domestically, irrespective of the source, whether conventional, shale, CBM or any other, from April 1, 2014, with exemption in certain cases. “The rules shall not be applicable where prices have been fixed contractually for a certain period of time, till the end of such period. These guidelines shall also not be applicable where the contract provides a specific formula for natural gas price indexation/fixation. The price determined under these guidelines shall be applicable to all consuming sectors uniformly,” the CCEA note stated.

It further said that the new gas pricing regime would be applicable for natural gas produced by Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL). By giving its stamp of approval, the Law and Justice Ministry has stated that there does not appear to be any constitutional or legal objection to the proposal.