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An Empowered Group of Ministers (EGoM) may meet on May 7 to consider Rangarajan Committee recommendation of more than doubling the price of domestically produced natural gas to $8.8 per mmBtu.
The EGoM on gas pricing and allocation headed by Defence Minister A K Antony will consider the recommendation of a panel headed by C Rangarajan, Chairman of Prime Minister's Economic Advisory Council, to replace current rates of gas varying between $4.2 to 5.73 per million British thermal unit with a complex international hub price formula.
Sources said the EGoM may also consider Power Ministry's request for changing the priority for allocation of natural gas by putting power plants at equal footing with urea making fertiliser units.
EGoM had previously accorded top priority to fertiliser plants for receipt of natural gas from Reliance Industries' eastern offshore KG-D6 fields. LPG extraction units were placed second on the list, followed by power plants.
This priority list essentially meant that when KG-D6 output started to fall, requirement of top priority customers in fertiliser and LPG sector was first met and remaining gas was pro-rata supplied to power plants.
With KG-D6 output falling to about 16 million standard cubic meters per day this month, there is no gas now left for power plants after meeting requirement of fertiliser and LPG sector.
Power Ministry wants the current output to be prorated between fertiliser plants and electricity generating stations.
Sources said the change in priority is likely to be opposed by fertiliser ministry as any cut in gas supplies to urea plants would have to be replaced by costlier imported LNG that would result in rise in government's subsidy outgo.
Also, the Rangarajan Committee recommendations in gas pricing would face stiff opposition from both user ministries of power and fertiliser.
While Power Ministry says the impact of gas price hike would be about Rs 29,800 crore on existing electricity producing plants, the Fertiliser Ministry said higher gas price would result in Rs 10,000 crore per annum increase in urea subsidy.
The panel has suggested determining domestic gas price through a complex averaging of international hub prices and imported LNG.
In first step, weighted average of prices prevailing at US Henry Hub, National Balancing Point of UK and netback wellhead of price of supplies into Japan was to be derived. This was to then be averaged out with actual cost of imported LNG into India.
This formula translates into a gas price of $8.5-8.8 per mmBtu.
