New Delhi, Sept. 1: The prices of petrol, diesel, natural gas and coal should either be determined by market forces or linked to global rates, the Planning Commission has suggested.
However, such a proposal may not be politically acceptable as these commodities will become costlier.
The Planning Commission said, Since natural gas supply is likely to increase in the next year or two, pricing of gas then, including new discoveries, should be left to competitive markets.
The views are incorporates in a document on the Integrated Energy Policy, which was approved by the Cabinet in December 2008.
It was made public today at the first full meeting of the commission after the UPA was voted back to power.
The plan panel disagreed with the methodology adopted by an empowered group of ministers to fix the price of Reliance Industries Krishna-Godavari (KG) gas.
Linking gas prices to crude movement is misleading as gas is not as easily tradeable as oil, because pipeline and liquefaction/re-gassification facilities take time to develop, the commission said, adding that long-term supply contracts such as those in Europe are more representative of prices. The KG gas price is linked to crude; at $60 a barrel, it is $4.2 per million British thermal unit, while at $25 a barrel, the gas price will be $2.5.
However, as the shortage of gas is likely to prevail till the end of this year, the price of domestic gas and its allocation should be independently regulated on a cost-plus basis, including reasonable returns.
In petrol and diesel, the commission said, market-determined prices would lead to a stable price regime and encourage private players to invest in a retail network.
Oil marketing companies are suffering losses as the government has not raised the prices of petrol and diesel in line with an increase in crude rates in the global market.
The commission said the subsidised prices of LPG and kerosene were greatly misaligned and imply a very large subsidy. This is leading to a huge uneconomic use, unintended benefits to certain classes of consumers and widespread adulteration of petrol and diesel.
In its recommendations for coal, the commission said, Coal prices should ideally be left to the market and trading of coal, nationally and internationally, should be free.
The share of coal sales through e-auction should be at least 20 per cent of production, instead of 10 per cent now.