Clarity on gas pricing after 2019 within six months

The government on Friday notified new formula which links gas prices to international benchmarks

In a positive development for the hydrocarbon industry in India, a committee led by former finance secretary Vijay Kelkar would submit the roadmap for pricing of domestic natural gas after 2019 with in six months time.

The government had notified the new formula, which links gas prices to international benchmarks on Friday. Last week, the panel which was also entrusted to come up with recomendations to lay roadmap for making India energy dependent by boosting its exploration and production sector, had submitted the first part of its report.

Kelkar in his report has batted for continuing with the current production sharing contract model, which allows for cost recovery by exploration and production (E&P) companies.

The committee highlighted; “Under PSC, the interests of the government are aligned with the interests of the contractors. There is little incentive for the investor to gold-plate or for wilful under-production. Under the PSC, as the investor returns improve, the Government take also increases as it is designed to allow the government to retain a fair share of the 'upside'.”

This comes at a time when Mukesh Ambani-led Reliance Industries was facing the heat for alleged under production from KG-D6.

It was on June 27, 2013 that the Cabinet Committee on Economic Affairs cleared the new gas pricing based on a formula suggested by a panel headed by the Prime Minister's Economic Advisory Council Chairman, C Rangarajan, in December 2012.

However, Kelkar panel was entrusted to look into pricing of domestic natural gas after 2019, as Rangarajan pricing would be applicable till that year only.

“We have only submitted the first part of the report related to exploration and production. The suggestions on pricing would be there in part II, which would be ready in another six months time,” one of the panel members told Business Standard.

The report also bats for kickstarting the Open Acreage Licensing Policy (OALP) and accelerate the building of a National data repository (NDR) to expedite the appraisal of Indian basins.

On tax front also, it demanded income tax holiday for all forms of hydrocarbons, while seeking an increase in tax holiday for assets that face difficulties due to natural and geological reasons.