The Telegraph
Thursday , May 22 , 2014
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Gas price, subsidy on agenda

New Delhi, May 21: The officials of the oil ministry will highlight gas pricing, investments in exploration and cuts in subsidies in their presentation to the Narendra Modi-government.

The ministry will explain the ground reality and the policies needed to boost energy security, trim the import bill and encourage investments, a senior oil ministry official said.

The ministry has stressed an early resolution of the pricing issue, which will have a far-reaching impact on investor confidence.

The Election Commission had put the announcement of the new gas price on hold till the completion of the polls.

The government had notified the new price formula, recommended by the C. Rangarajan committee, which is expected to double the rates to about $8.40 per million British thermal unit (mBtu).

The issue got complicated with Reliance Industries and partners BP and Niko Resources slapping an arbitration notice on the government over a delay in implementing the revised price.

Oil ministry officials said they would have to seek the opinion of the law ministry on the arbitration notice and look at the possibility of a staggered hike till they were able to clear the air on the formula.

Clarity on gas prices will make several explored field viable for production.

According to energy research firms, the reform in the sector will unlock around 12 trillion cubic feet of discovered reserves.

To increase investments in the exploration and production sector, it is important that the domestic producers get at least the average price of what others elsewhere are getting. The ministry wants to make the regime investor-friendly by taking a relook at the clauses of the production-sharing contract.

Increased exploration will reduce the country’s dependence on imports.

The ministry will press for a review of the oil subsidy bill by reducing the number of subsidised LPG cylinders in a year from 12. Officials said a periodic hike in cylinder prices would help to trim the subsidy bill. State-owned firms suffer a loss of Rs 449 per cylinder.

Efforts will also be made to cut taxes on diesel, which will help to ease the impact of price deregulation.