RIL chairman Mukesh Ambani, BP's CEO Bob Dudley meet PM, seek clarity on gas pricing

NEW DELHI: Reliance Chairman Mukesh Ambani and partner BP’s CEO Bob Dudley met Prime Minister Manmohan Singh and top officials to press for quick approvals and marketbased price of natural gas, while in a separate development, the Planning Commission has opposed the gas price formula proposed by PM’s Economic Advisory Council Chairman C Rangarajan and sought changes.

“An empowered group of ministers (EGoM) is expected to meet soon to consider implementation of the gas pricing formula suggested by the Rangarajan committee, which would double its price. The draft EGoM note is under circulation and we have received comments from some departments,” an oil ministry official said. RIL is currently selling gas at $4.20 per unit and has been demanding an import parity pricing. Indian consumers imports liquefied natural gas (LNG) at $16-18 per unit from the spot market.

Dudley did not give details of what he discussed with the government. “We are the largest investor in India in the sector and we have come to review progress of plans,” he said. After meeting Ambani and Dudley, Ahluwalia told reporters that RIL and BP were “very keen” that the government’s view on gas pricing. “I did say that there is an empowered group of ministers and it will be considering Rangarajan Committee recommendation,” Ahluwalia said.


In its EGoM note, the Planning Commission criticized Rangarajan panel’s suggestion of linking the price of domestically produced natural gas to international benchmarks such as US’ Henry Hub as well as the average wellhead price at which India imports gas, government officials said.

“Since we are importing gas in the form of LNG, which is then re-gasified, it is logical to incentivise domestic investment up to the point where domestic gas production is competitive with gas via LNG imports,” plan panel said in the note.

It asked the EGoM to modify the proposed formula because of its linkage with benchmarks such as Henry Hub of the US. “Since the US market does not allow exports freely, US natural gas is therefore artificially underpriced,” it said. It also criticized the Rangarajan report for being silent on pricing of gas after five years.

“Investors cannot be expected to invest in this sector if they have no assurance what price they will get after five years,” it said. The note suggested the government to exit from allocating gas to “priority” consumers and asked it to pay direct subsidy to the priority sectors such as fertilizer companies from enhanced profit share because it would be higher if gas prices were free.