Govt lets producers sell coal-bed methane at market rate

India has permitted coal bed methane (CBM) producers to sell gas at the market rate, a government statement said on Wednesday, a move that could help companies such as Oil and Natural Gas Corp and Reliance Industries.

The producers can also now sell CBM gas to their affiliates if they are unable to find any other buyer, the government statement said.

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi on Wednesday gave its approval for marketing and pricing freedom to coal bed methane (CBM) contractors to sell the CBM at arm's length price in the domestic market.

The government will announce a price for CBM gas, which will be used as a floor for calculating its royalty and other charges.

However, CBM producers will pay royalties and other dues to the government on the basis of sale or market prices, if it is higher than rate notified by the Petroleum Planning and Analysis Cell (PPAC), whichever is higher, the statement added.

While discovering the market price for arms-length sales, the contractor has to ensure a fully transparent and competitive process for sale of CBM with the objective that the best possible price is realised for the gas without any restrictive commercial practices.

The policy is expected to incentivise the CBM operation in the country to boost gas production and will generate economic activities which in turn will be beneficial for creating more employment opportunities in CBM operations and related activities.