Report of the Committee on Gas Pricing – 2014 (C. Rangarajan Committee)

In December 2012, the Rangarajan Committee submitted its report on "Production Sharing Contract (PSC) Mechanism in Petroleum Industry". The report, inter- alia, recommended a formula for pricing of domestically produced gas. The Rangarajan Committee made the following observations in para 24.2 of their report while discussing "An Approach to Gas Pricing till Such Time When Gas -on Gas Competition Becomes Feasible. As discussed above, it may not be feasible to introduce gas-on-gas competition at this juncture. Therefore, a policy for pricing natural gas, till such time when gas-on-gas competition becomes feasible, is discussed below. However, it is recommended that Government review the situation after five years to examine the feasibility of introduction of gas-on-gas competition. In the light of the discussion in §24.1, a policy on pricing of natural gas for India is proposed. Since a competitive domestic price for gas does not currently exist and " may not be expected to come about for several more years, the policy will have to be based on searching out from global trade transactions of gas the competitive price of gas at the global level. As the global market is not fully integrated in terms of physical flows and is also not everywhere liquid enough, it is proposed to combine two methods of search for such prices. The Rangarajan Committee had recommended that their gas pricing formula shall apply uniformly to all sectors, while allocation of gas will be as per the prevailing Gas Utilization Policy (GUP) of the Government. The report further stated that the proposed formula would only apply prospectively and would not be applicable to cases where gas prices have already been approved.