Green light to panel report on guidelines for gas pricing formula

New Delhi, June 8 (UNI) Petroleum and Natural Gas Ministry has accepted the report of the Committee constituted to formulate transparent guidelines to approve natural gas price formula/basis for giving government approval under the production-sharing contracts.

The committee had recommended that in all situations where a price discovery through competitive bidding is possible, there should be no need to apply any other principle for valuation of gas.

Once a market-determined price has been discovered between the suppliers and customers through a transparent competitive bidding process, there should be no need for the government to interfere with the same, a statement said.

Further, the commitee has said that in the absence of a market determined price discovered through a transparent bidding process, where valuation of gas has to be necessarily done by government, it may be done based on the price in the most recent competitively determined contract in the region duly indexed to the present.

Indexation is to be done as per the provisions of the market determined contract sets out various terms and conditions of supply, including the price review mechanism.

The committee has noted that each contract, normally, has a price review clause every five years. If the price stands reviewed as per the reference contract, that may become the new reference.

For interim periods, the committee has recommended that indexation may be linked to percentage increase in price of cheapest liquid fuel like Furnace oil.

The committee was of the view that the above valuation may be applied only when actual supply has commenced and the price has not been discovered through the market mechanism.

However, if the actual price at which any producer supplies to any consumer is higher than the one arrived at by above methodology, then the higher price is to be reckoned for government's take.

It would be ideal if the committee's approach had never to be applied but if the eventuality does arise, DG DGH and Director, PPAC will do the calculation based on committee's recommendations, committee said in a statement.

It would be DGH's responsibilities to ensure that the producer remitts the government's take accordingly.

The committee had held extensive consultations with various stakeholders, including the producers as well as the consumers besides other expert organisations before finalising its report.

The committee headed by the Joint Secretary and Financial Advisor, Ministry of Petroleum and Natural Gas was constituted in August last year.

UNI