Rangarajan panel moots parity-based gas pricing

The C Rangarajan Committee on gas pricing has suggested that domestic natural gas providers should get a price similar to the prices producers receive in other gas-producing areas.

In its report submitted recently, the committee headed by the chairman of the Prime Minister's Economic Advisory Council has proposed a gas price formula based on the average of two prices - the price at other producing destinations and the volume-weighted price of the United States' Henry Hub, the UK's NBP and the Japan Custom Cleared (on net-back basis, since it is an importer).

The arm's length price thus computed as the average of the two price estimates would apply equally to all sectors, regardless of their prioritisation for supply under the Gas Utilisation Policy, the report has said.

The panel, which has looked into production sharing contracts (PSCs) in petroleum sector, said the proposed policy would provide for estimation of an unbiased arm's length price for the Indian producers.

The relevant price in this context would be on par with the price producers receive in other gas-producing destinations, an official statement said.

The suggested formula will apply to pricing decisions made in future, and can be reviewed after five years when the possibility of pricing based on direct gas-on-gas competition may be assessed, it said.