Narendra Modi meets oil, finance ministers

New Delhi, June 22 (IANS) Against the backdrop of an imminent announcement of a new price for domestically produced gas, Prime Minister Narendra Modi Sunday met Petroleum Minister Dharmendra Pradhan for the second time in three days, sources here said.

Finance Minister Arun Jaitley also joined the deliberations Sunday.

An official source told IANS the new government is exploring whether modifications can be made in the implementation of the Rangarajan formula approved by the previous UPA government for pricing of all domestically produced natural gas.

The oil ministry had in April told Reliance Industries, which is supplying gas from its eastern offshore fields at the old price of $4.2 per unit even after it expired on March 31, that the new rate will be implemented from July 1.

A new rate may be announced this week, the source said on condition of anonymity.

The Election Commission had asked the government to defer announcing the new -- and likely doubled -- price of natural gas produced by companies such as RIL till after the general elections had been completed.

The Rangarajan formula recommends pricing rates at an average cost of importing liquefied natural gas (LNG) into India and rates prevailing at international hubs in the US and Britain as well as price of gas imported into Japan.

The ruling BJP had said during their election campaign that the party would relook at the gas pricing issue in case it came to power.

There has been opposition to the formula from various quarters on account of its likely effect on electricity tariff, urea cost, CNG rates and piped cooking gas price.

The Fertiliser Association of India (FAI), for instance, has called for delinking domestic gas from the price of imported LNG, and said: "The proposed massive rise in gas price will increase the subsidy outgo of urea sales by Rs.10,000 to 15,000 crore per annum."

However, the Confederation of Indian Industry (CII) has called for operationalising the government's decision on increasing gas prices, saying deferring implementation would affect investments in the oil and gas sector.

A recently proposed compromise possibility speaks of allowing higher price only on output in excess of an operator's current production, or only for gas production from fields discovered under the New Exploration Licensing Policy like the Reliance Industries-operated KG-D6 fields.