Gas at market price: GAIL

New Delhi, Sep 19 (UNI) Gas Authority of India Limited (GAIL) is in favour of gas being available to consumers at market prices on a non discriminatory basis and has submitted its comments to the Petroleum Ministry to work out a gas pricing formula.

The company said that when a transparent mechanism on pricing of gas does not exist, the prices should be linked to alternative fuels available.

The ministry is currently trying to resolve a dispute over gas pricing between Reliance Industries Ltd and Reliance Natural Resources Ltd.

The ministry has also set up a panel to examine alternatives for approving the price formula under production sharing contract (PSC).

The panel set up last month has sought comments of all the industry players before firming up its view.

GAIL said that such linkages of gas price to alternative fuels would help the Government realise its share of the gas under product sharing contract in the form of royalty and profit petroleum.

The company has also urged that it is necessary to have ceiling price for the maximum affordability of large consumer base and that there should also be a floor price to take care of cost plus price of the gas under PSC.

Meanwhile, the oil industry has told the Petroleum Ministry that gas sale deals under the PSCs should be open for review only if there is evidence to indicate that a transaction was not on arms length basis.

''Transactions between non-affiliates should be deemed approved and only when there is evidence to indicate that a transaction may not be at arms length, should the Government of India be moved to open an inquiry,'' it said.

The comments by the industry were made in response to an invitation for suggestions made by a committee set up by the ministry to formulate transparent guidelines for approving gas price formula and the basis for giving government approval under the production sharing contracts.

The industry pointed out that an exploration and production (E&P) company, as a gas supplier, would be interested in maximising the return from its gas sales.

''Thus an E&P company's (with no affiliates) interests will be aligned with those of the Government of India from a profit petroleum and royalty regime standpoint....Ordinarily, there should be no concern with unaffiliated third party transactions since there is no financial incentive to an E&P company to offer a lower price,'' it pointed out.

The industry admitted there were loopholes which non-affiliated parties could use to get around this. ''As a result, the GOI should monitor such sales to ensure there is no abuse but approval should not be required for each transaction.'' MORE UNI/RT SRS VV1452