India to Price CBM As Per Rangarajan Formula

Indian government has decided to price coal bed methane (CBM) as per the Rangarajan formula notified under the pricing guidelines, says Financial Express newspaper.

As per the formula devised by Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan, CBM will be priced similar to natural gas, which, according to current rates of benchmark prices, would be around $8/mmBtu.

This decision is likely to have a negative impact on CBM explorers GEECL, Essar Oil and ONGC as these firms sell at prices not less than $10/mmBtu even though the minimum selling price stipulated by the government is between $6.2-6.7/mmBtu for methane across fields, reports Financial Express.

According to the news report, earlier, the companies believed that according to the production-sharing contract (PSC), the new Rangarajan formula-based prices would not be implemented for CBM operations, as it already has a pre-approved price.

The Cabinet-approved gas pricing regime has been put in abeyance due to an Election Commission order.