Kelkar panel report on gas pricing relevant for future : Reports

NEW DELHI: Suggestions by a committee headed by Vijay Kelkar, a former finance and petroleum secretary, that the government should stop prioritising consumption of scarce gas and allow producers to charge market rates for it, are relevant only for the future because its mandate was to suggest a road map for market-determined gas pricing after March 2019, official sources said.

The Kelkar panel, constituted by the UPA, was tasked with suggesting a market mechanism for gas pricing that would replace the current pricing regime after five years, government sources said.

In a recently circulated consultation paper, Kelkar panel proposed that all forms of natural gas be sold at market-determined prices. "At the end of the new gas pricing period (March 2019) producer prices for natural gas should be unfettered of any government intervention, allowing for gas pricing by producers on market- determined basis through transparent arms length transactions," the paper, reviewed by ET, said.


While, the terms of reference of the committee suggests that market-determined gas pricing should commence from the end of the 12th Five Year Plan, that is March 2017, the price formula suggested by the committee headed by C Rangarajan, an economic advisor to the former Prime Minister, is supposed to be valid till 2019.

"Hence, the suggested measures for transation to market determined prices need to be implemented by 2017 or 2019, depending on the final government decision on this issue," the consultation paper added.

Kelkar declined to comment on specific matters. "The report has two parts. One deals with oil and gas production and the other with market-determined gas prices after the new regime (the one suggested by Rangarajan) ends. The report will be ready by September 30," he told ET.

In January this year the UPA government this year notified a pricing formula based on recommendations of the Rangarajan committee that would have doubled domestic gas rates to $8.40 per unit from April 1 for five years.

But, the government’s move to announce the new rate was vetoed by the Election Commission because of the ongoing general elections. A committee of secretaries is currently examining the Rangarajan formula.

"The committee may also recommend the period of applicability of the new rate and the Cabinet is expected to take a final call by September 30," a source said.

On August 22, the government formed a fourmember committee of secretaries to expeditiously resolve pricing related issues.

The oil ministry will, however, inform the Cabinet of the Kelkar committee’s strong defence of the existing oil and gas exploration regime.

The panel has opposed the ministry’s proposal to put in place a revenue-sharing system during the next auction of oil and gas blocks.