Tariff panel to take up ONGCgas prices

Producing field

Quantity
(in mmscmd)

Price (in $/mmbtu)

Price

Floor

Ceiling

Panna, Mukta & Tapti

5

4.08

6

3.86

Ravva PSC

1.10

1.75

3

Present

2.96

Ravva Satellite

1

2.30

3.3

Lakshmi

Contract I

3.06

4.46

Contract II

3.68

GSPCL

3.76

Regassified LNG
(Before sales tax)

3.45

Price of APM gas ($)

Consumer Price

Producer Price

1.85

1.80

 After considering the report of the Sankar Committee in September 1997, the government dismantled the cost-plus pricing and decided to link the consumer price of gas to the international prices of the basket of fuel oil from October 1, 1997.  Petroleum ministry officials argue that costs alone do not determine prices. Companies should be allowed some margin in the prices over total cost. The surplus generated because of margins can be further invested by upstream companies in exploration business.  Gas prices were to reach a 100 per cent parity with fuel oil prices by 2001-02 after which they were to be linked to the market. The fuel oil basket now stands at $6.86 for one million British thermal units though the producer price being paid to ONGC and OIL is about $1.80 even after the recent revision.  Cost-plus is considered the basis for setting the prices of essential commodities but petroleum ministry officials argue that there are other components which should go into price besides the cost.  These are the market conditions, which include prices being offered by competitors, and investment and cash flow requirements, of a company.