Panel for market linked gas price

New Delhi: As a secretaries panel considers the quantum of hike in natural gas price, government-appointed Kelkar Committee has advocated moving to market determined pricing with rates being fixed at the highest possible level. In a consultation paper, the Committee, which was last year formed to suggest ‘Roadmap for Reduction in Import Dependency in Hydrocarbon Sector by 2030’, said a cost-plus model for fixing natural gas prices as proposed by a Parliamentary Commi-ttee and some downstream industry players, may incentivise operators to gold-plate cost. 

 

The panel submitted the consultation paper to the Oil ministry last month with an request for putting it up on the ministry website for stakeholders to comment. The ministry, however, is yet to web host it. “The principle of intergenerational equity implies that the natural resources should be priced at the highest price possible in the market, i.e. based on market determined pricing. This will ensure energy security for the country by encouraging domestic exploration and production activities, efficient use of the resource and reduction in import burden,” it said. 

 

On the argument that a high price of natural gas may be economically unviable or unsustainable for sectors like fertilizer and power, the panel said, “it will be unfair to supply natural gas at artificially low prices to all consumers, including those who can afford to pay a higher price in order to support the priority sector.”

 

“Transition to market-determined producer prices of gas is essential to facilitate development of a gas market in the country by increasing the supply of domestic natural gas," it said, adding market-determined price would give higher incentive for E&P activity given a more balanced risk-reward equation for producers.