Ranga Panel failed to resolve gas pricing issue, charges Confederation of Indian Industry

NEW DELHI: The Confederation of Indian Industry (CII) has demanded full market freedom for natural gas and said the Rangarajan Committee did not go far enough to resolve the gas pricing matters.

The industry body wants prices to be benchmarked with imported gas or liquefied natural gas (LNG), a key demand of Reliance India Limited ( RIL), which is selling gas from KG-D 6 block at $4.2/ unit.

The Confederation of Indian Industry, which has members such as RIL, ONGC, Cairn, BP and Shell, has attacked the panel for discriminating domestic gas vis-à-vis crude oil because its recommendations would lead to a price, which is at a 40-50 % discount to imported gas, the chamber said in a statement.

It said the panel’s formula was consistent with the contracts that companies had signed with the government as neither provided a pricediscovery mechanism nor import parity prices.

“Our key concern is that the proposed mechanism does not deliver a market price as promised in Nelp and the PSC and is unlikely to incentivise investments in technically-challenged areas and high-risk exploration ,” Sashi Mukundan, co-chair of CII National Committee on Hydrocarbons and region president & country head (India), BP Group of Cos, said.

CII criticised the panel for not providing a clear five-year road map for arms-length market-determined gas pricing. “Ultimately, what is critically important is, over the next five years, to have a clear transition plan to either a free market pricing regime or to an LNG parity pricing in the absence of gas-on-gas competition ,” Mukundan said.

CII also opposed the panel’s proposal to change the current fiscal regime that allows companies to first recover expenditure from oil and gas fields before sharing profits with government. “The proposed revenue sharing regime is out of sync with India’s stage of E&P development and does not compensate investors for the high exploration and development risk,” the CII statement said.