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Veerappa Moily recommends new uniform gas price, likely to be in range $6-7 per mmbtu

MUMBAI: Displaying a significant shift in stance from his earlier view, Veerappa Moily, Union minister for petroleum, told ET that the petroleum ministry has recommended a newuniform gas price which could be in the range of $6-7 per million metric British thermal unit (mmbtu) and not as high as $8-$8.5 per mmbtu. 

He said the new price recommendation has been done according to the formula suggested by the Rangarajan panel and the petroleum ministry has sent a formal proposal stating the same to the 
Cabinet Committee on Economic Affairs that has been constituted to take a final decision on the issue. 

"We have sent our proposal on the new uniform gas price to the Cabinet Committee of Economic Affairs, we are going by the recommendations made by the Rangarajan panel but the gas price that we have recommended is not as high as $8-$8.5 per mmbtu but much lesser ...around $6-$7," said Moily. 

"The CCEA was slated to meet today on the issue but because both the fertilizer and the power ministry did not send in their views on the subject, that meeting could not happen," Moily added. 

Senior industry sources told ET that last week the Cabinet Secretariat had returned the petroleum ministry's proposal of doubling the domestic natural gas prices from the present $4.2 per mmbtu. It had held that the Empowered Group of Ministers (EGoM) led by defence minister AK Antony was not empowered to take such a decision, as it could only take decisions on allocation of gas for various sectors, and not on the pricing mechanism.

"There is no 
EGoM now, the matter has been referred to the CCEA as of now," said Moily. This comes after the ministry had circulated a draft note that endorsed the $8-$8.5 price suggested by a panel headed by C Rangarajan, chairman, Economic Advisory Council to the Prime Minister, which was arrived at by averaging international hub prices with the cost of imported gas (LNG). 

This is in continuation with Moily's move to introduce some bold reforms in the sector by proposing a new uniform gas price policy to ensure parity in prices of imported gas and domestically produced gas. 

Moily's outlook on the gas sector has come under severe criticism as industry sources say that he is batting for private energy companies like RIL who have been lobbying for increasing domestic gas prices and bringing them on par with 
LNG prices. 

In fact, earlier this month, Tapan Sen, member, Standing Committee on Petroleum and Natural Gas and a senior leader of the CPI (Marxist) had asked 
Manmohan Singh to reject the pricing formula for domestic gas pricing recommended by the Rangarajan Committee.