At a time when the finance, power and fertiliser ministries have snubbed the Rangarajan committee's report on gas prices, Cairn India and Gujarat State Petroleum Corporation (GSPC) have joined the bandwagon of companies demanding a rise in gas prices - from $4.2 a million British thermal units (mBtu) to $8.5 a mBtu.
The Rangarajan committee had said the price of domestic natural gas was expected to rise to $8.8 a mBtu.
Cairn India, which commenced commercial production of gas from the Rajasthan block last month, has written to the petroleum ministry, seeking a price of $8.5 per mBtu for its consumer, Gujarat Narmada Valley Fertilizers and Chemicals.
GSPC has reportedly told the ministry it has received 34 bids quoting $8.8 per mBtu during an e-auction for gas from the Deen Dayal West field. It also suggested an alternative pricing formula, saying consumers across the industry were willing to pay according to that. According to reports, the total bids were for 35.96 million standard cubic metres a day (mscmd), while the available gas was about 5.2 mscmd. GSPC says the oversubscription shows consumers are willing to pay the proposed price.
Earlier Reliance Industries, BP, ONGC, etc, had also sought higher prices for gas.
Currently, Cairn India's RJ-ON-90/1 block produces about 30 million standard cubic feet (mscf) of gas per day from the Raageshwari Deep Gas field. The initial commercial volume was about five mscf. Cairn India had written to the ministry after the commencement of commercial production.
Disappointed by the Rangarajan committee's report on gas pricing, BP had also written to the prime minister, suggesting an alternative pricing system. It had recommended a transition towards the 'arm's-length market determined' system, to the level of imported liquefied natural gas, through a period of three years. For the transition period, it suggested an additional price incentive of $1.5 a mBtu to meet the high costs and exploration risks in deep-water developments.