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GovernmentofIndia
CabinetCommitteeonEconomicAffairs(CCEA)
18October201420:29IST

RevisionofDomesticGasPrices
The Cabinet Committee of Economic Affairs, chaired by the Prime Minister Shri Narendra
Modi,todayapprovedthenewdomesticgaspricingpolicy.
ThesalientfeaturesofthenewGasPricingPolicyarefollows:
(i)AspertheformulationapprovedbytheCCEAtoday,upwardrevisioningaspriceswillbe
approximately75%lessascomparedtothepricearrivedatusingRangarajanformula.
(ii) Approximately 80% of the additional revenue due to revision in gas price will go to the
Governmentcompanies.
(iii) Government will get additional revenue of approximately Rs. 3800 crore per annum on
accountofhigherroyalty,higherprofitpetroleumandhighertaxes.
AfterthenewGovernmenttookover,adecisionwastakentodefertheDomesticNaturalGas
Pricing Guidelines, 2014 and to get the matter reexamined. For this purpose, a Committee which,
included,SecretariesoftheMinistries/DepartmentsofPower,ExpenditureandFertilizerasMembers
with Additional Secretary, Ministry of Petroleum and Natural Gas as Member Secretary was
appointed.
TheCommitteehasrecommendedanapproachforgaspricedetermination,whichisbasedon
themodificationtotheRangarajanformulaby:
(i) Removal of both the Japanese and Indian LNG import components in the
formula.
(ii)ConsiderationofAlbertaGasReferencepriceinplaceofHenryHubPricesfor
Canadianconsumption.
(iii) Considerationof Russianactualpricein place of NationalBalancingPoint
price for the Russian consumption considered under Former Soviet Union
(FSU)countries.
(iv) Consideration of appropriate deductions on account of transportation and
treatmentcharges,etc.,fordifferenthubprices.
(v)Theoptionsofbiannualandannualpricerevisioninsteadofquarterlyrevision
maybeconsidered.
TheCommitteealsorecommendedapplicabilityofthemodifiedapproachprospectivelyandto
apply it uniformly to all sectors of the economy, along with prevailing gas allocation policy of the
Government.TheCommitteewasoftheviewthattheNationalOilCompanies(NOCs)mayalsoget
thesamepriceasdeterminedundertheproposeddispensation,includingthegasfromthenomination
fields. In addition, the Committee also drew attention to the fact that although in India gas is
historically being priced on National Calorific Value (NCV), the input prices being used in the
RangarajanformulaarebasedonGrossCalorificValue(GCV).
ThefollowinghasbeenapprovedbytheCCEA:
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(i)Thegaspriceisproposedtobedeterminedaspertheformulagivenbelow
P=VHHPHH+VACPAC+VNBPPNBP+VRPR
VHH+VAC+VNBP+VR
Where
(a)VHH=TotalannualvolumeofnaturalgasconsumedinUSA&Mexico.
(b)VAC=TotalannualvolumeofnaturalgasconsumedinCanada.
(c) VNBP = Total annual volume of natural gas consumed in EU and FSU,
excludingRussia.
(d)VR=TotalannualvolumeofnaturalgasconsumedinRussia.
(e)PHHandPNBParetheannualaverageofdailypricesatHenryHub(HH)and
NationalBalancingPoint(NBP)lessthetransportationandtreatmentcharges.
(f) PAC and PR are the annual average of monthly prices at Alberta Hub and
Russiarespectivelylessthetransportationandtreatmentcharges.

(ii)Theperiodicityofpricedetermination/notificationshallbehalfyearly.Thepriceandvolume
datausedforcalculationofapplicablepriceshallbethetrailingfourquarterdatawithone
quarterlag.Thefirstpricewouldbedeterminedonthebasisofpriceprevailingbetween
1stJuly,2013and30thJune,2014.Thispricewouldcomeintoeffectfrom1stNovember,
2014 and would be valid till 31st March, 2015. Thereafter, it would be revised for the
period1stApril,2015to30thSeptember,2015onthebasisofpricesprevalentbetween1st
January, 2014 and 31st December, 2014, i.e., with the lag of a quarter and so on. The
priceswouldbeannounced15daysinadvanceofthehalfyear,forwhichitisapplicable.
(iii) The price so notified would be applied prospectively with effect from 1st November, 2014
andwouldbeonGCVbasisasinputpricesintheformulaareonGCVbasis.
(iv)Therevisedgasprice,sodeterminedwouldbeapplicabletoallgasproducedfromnomination
fields given to ONGC and OIL India, NELP blocks, such PreNELP blocks where PSC
providesforGovernmentapprovalofgaspricesandCBMblocks.Thefollowingarethe
exceptionstowhichthispolicywouldnotapply:
(a) Small and isolated fields in nomination blocks, given their peculiar conditions,
guidelinesforpricingofgaswereissuedin2013wouldcontinuetoapply.
(b)Wherepriceshavebeenfixedcontractuallyforacertainperiodoftime,tilltheendof
suchperiod.
(c)WherethePSCprovidesaspecificformulafornaturalgaspriceindexation/fixation.
(d) SuchPreNELPblockswhereGovernmentapprovalhasnotbeenprovidedunderthe
ProductionSharingContract(PSC).
(v)ThematterrelatingtocostrecoveryonaccountofshortfallinenvisagedproductionfromD1,
D3discoveriesofBlockKGDWN983isunderarbitration.Hencetheoperatorwouldbe
paidtheearlierpriceofUS$4.2/MMBTUtilltheshortfallquantityofgasismadegood.
Itisproposedthatthedifferencebetweentherevisedpriceandthepresentprice(US$4.2
per million BTU) would be credited to the gas pool account maintained by GAIL and
whethertheamountsocollectedispayableornot,tothecontractorsofthisBlock,would
bedependentontheoutcomeoftheawardofpendingarbitrationandanyattendantlegal
proceedings.
(vi)Foralldiscoveriesafterthisdecision,inUltraDeepWaterAreas,DeepWaterAreasandHigh
PressureHigh Temperature areas, a premium would be given on the gas price to be
determinedaspertheprescribedprocedure.
(vii)IntheNERregion,the40%subsidywouldcontinuetobeavailableforgassuppliedby
ONGC/OIL. However, as private operators are also likely to start production of gas in
NER,andwouldbeoperatinginthesamemarket,thissubsidyshouldalsobeavailableto
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themtoincentivizeexplorationandproduction.

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AK/SH/SK

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