To make new exploration and production activities viable, a committee under former finance secretary Vijay Kelkar has recommended market-linked pricing for domestic natural gas. The suggestion comes amid ongoing consultations by a committee of secretaries on a new gas-pricing formula.
The committee, set up in 2013 to "prepare a road map for enhancing domestic production and sustainable reduction in import dependence by 2030", had brought out its first report in January. According to it, market-driven prices for gas will create a gas market in the country by increasing supply. Natural gas prices should be free from government intervention, it said.
In the interim, the government should develop transnational gas pipeline infra to connect demand and supply centres across the country, frame guidelines for effective regulation through the Petroleum and Natural Gas Regulatory Board and develop additional gas sources like coal-bed methane and shale, besides encouraging trading in spot and future contracts for gas, it suggested.
It suggested till market-linked prices were arrived at, the difference between market and subsidised prices of gas should be reduced, in line with fiscal-consolidation initiatives.
Deliberating on subsidised sales, the panel noted it was unfair to supply natural gas at artificially low prices to all consumers, including those who could afford to pay higher prices, to support the priority sectors of power and fertilisers. Priority sectors could be supported by the government, which would get more taxes and royalty from a higher price, owing to transparent and targeted subsidies, the panel said.
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