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Economy Dec 4, 2012

Rangarajan panel report on oil, gas pricing after 15 December

New Delhi: The Prime Minister-appointed Rangarajan Committee is likely to present its report on changes in the regime governing oil and gas exploration contracts as well as pricing of natural gas in the second half of December.

"What we have been told is that the committee has completed deliberations on the issue and the report is under finalisation. We are told that the report will be submitted after December 15," a senior Oil Ministry official said here.

The report would come at a time when Reliance Industries is locked in a bitter battle with the Oil Ministry. Reuters

The panel was appointed to suggest changes in existing oil & gas exploration contracts with energy firms to minimise monitoring of expenditure, fix system to determine domestically produced natural gas price and modify existing profit-sharing mechanism, which, according to the national auditor, favoured private energy firms.

The six-member Committee, headed by Prime Minister's Economic Advisory Council Chairman C Rangarajan, was
previously to submit report by October 31 but was granted a months extension. Then, it was expected to submit the report this week but has been delayed further.

Sources said the panel in its draft report had suggested sweeping changed in the present format of Production Sharing Contract (PSC). It wanted the government to move to a production-linked payment regime where explorers bid for a percentage of output they would share with the government.

The firm offering the maximum would win a block or area. Under the present system, operators are first allowed to recover all their expenditure before sharing profits with the government. This system had been criticised by the Comptroller and Auditor General (CAG), which said it encourages firms to postpone government getting higher profit share by inflating expenditure.

Sources said the committee will also suggest structure and basis for pricing of natural gas. The report would come at a time when Reliance Industries is locked in a bitter battle with the Oil Ministry on the price of gas that will apply when its present $4.2 per million British thermal unit rate for KG-D6 expires on March 31, 2014.

Besides Rangarajan, the panel is comprised of former Supreme Court Judge Jagannadha Rao, Planning Commission Member B K Chaturvedi, Prof Ramprasad Sengupta, former bureaucrat J M Mauskar and former ONGC Videsh Ltd Managing Director Joeman Thomas.

PTI

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