Gas producers have now begun putting pressure on the government for raising the ceiling price of $4.2/mmbtu imposed on new gas supplies from NELP blocks by the Empowered Group of Ministers (EGOM). Though the $4.2/mmbtu price tag was specifically engineered for gas out of RIL`s D-6 gas, the EGOM pricing principle was meant to be adopted as the default price for all new gas. The fact that this is a benchmark price is evident from the fact that the Union cabinet had also raised the price of APM gas to the $4.2/mmtu benchmark.
Both ONGC and RIL have recently Declaration of Commerciality for two blocks -- NEC NEC-ISN-97/2 and MS-OSN-2000/2 respectively -- in which they have argued that the cost economics justify a price higher than $4.2/mmbtu. RIL has made it clear that economic viability of its block is established only over $6/mmbtu whereas ONGC claims a negative Net Present Value from its block at $4.2/mmbtu. The EGOM had tried to peg the price of gas to that of crude, subject to a ceiling. That had been the traditional manner in which gas prices were pegged in the past in India.ONGC and RIL are making the claim that arbitrarily fixing the price of gas to that of crude without taking cost economics of production into account is not going to work.
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