The Telegraph
Friday , August 29 , 2014
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Kelkar gas rate logic

New Delhi, Aug. 28 (PTI): The government-appointed Kelkar Committee favours moving to market determined pricing of natural gas with rates being fixed at the highest possible level, even as a secretaries panel considers the extent of a price hike.

In a consultation paper, the committee said a cost-plus model for fixing natural gas prices, proposed by a parliamentary committee and some downstream industry players, may incentivise operators to inflate costs.

The committee was formed last year to suggest a roadmap for reduction in import dependency in the hydrocarbon sector by 2030.

The panel submitted the consultation paper to the oil ministry last month with a request to put it up on the ministry website seeking stakeholders’ comments. The ministry, however, is yet to post it on the Net.

“The principle of intergenerational equity implies that the natural resources should be priced at the highest price possible in the market or be based on market determined pricing. This will ensure energy security for the country by encouraging domestic exploration and production activities, efficient use of the resource and reduction in import burden,” it said.

On the argument that a high price of natural gas may be economically unviable or unsustainable for sectors such as fertiliser and power, the panel said: “It will be unfair to supply natural gas at artificially low prices to all consumers, including those who can afford to pay a higher price in order to support the priority sector.” The priority sectors may be supported by the government, it added.