Government formalizes the price formula for natural gas

The Central Government has finalized a new pricing mechanism for natural gas. The new gas pricing formula is believed to be much lesser than the formula suggested by the Rangarajan Committee.

Process of finalization

The Centre had constituted a panel of secretaries to determine the methodology of pricing gas. The central cabinet accepted the recommendations of this panel at its meeting held on October 20.

New pricing formula

As per the new formula, domestic gas price will now increase from $4.2 per mmBtu (million British thermal unit) to $5.61 per mmBtu. The Rangarajan Committee has recommended revision of prices to $8.4 per mmBtu.

This price will, however be revised every six months.

This new gas pricing formula will be effective from the 1st of November.

Balancing viability and consumer interests

The new gas pricing formula aims to keep the price high enough so that drilling projects remain viable, while keeping the price reasonable enough so that the consumers don’t buckle under the high costs.

Also the review that is to be carried out every six months will ensure that the prices are modified suitably to protect the interest of all stakeholders. This six monthly review will eventually lead to free natural gas prices.

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Categories: Business & Economy Current Affairs 2017

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