Between 2016 and 2019 the government had given pricing freedom for all fields except those given to state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) on a nomination basis.
But, restrictions remained such as a ban on affiliates of producers buying the fuel and in some cases, a state nominee being mandated to offtake the gas. This restricted competition had kept prices seen as artificially low.
Oil Minister Dharmendra Pradhan told reporters here that the Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, approved the new natural gas marketing reforms,.
There will be no change in the price of gas sold by ONGC and OIL from fields given to them on a nomination basis. The rate at USD 1.79 per million British thermal unit is half of the production cost.
The minister said the CCEA approved a standard procedure for discovering the price of gas through a transparent and competitive e-bidding as also "permitting affiliates to participate in the bidding process for the sale of gas".
Complete marketing freedom has been provided where production sharing contracts (PSCs) already provide for pricing freedom. This would benefit firms such as Vedanta-owned Cairn and Focus Energy who can now sell fuel to anyone and not necessarily to state-owned GAIL.
"This will add 40 million standard cubic metres per day of production from Krishna-Godavari basin and other areas to the current output of 84 mmscmd," Pradhan said.
He said the ban on producers buying their own gas will continue to prevent manipulations. But, their affiliates can participate in the auction for the discovery of price and buying the gas, he said.
Pradhan said the policy aims to provide a standard procedure for the sale of natural gas in a transparent and competitive manner to discover market price by issuing guidelines for sale by the contractor through e-bidding.
"This will bring uniformity in the bidding process across the various contractual regimes and policies to avoid ambiguity and contribute towards ease of doing business," he said.
He, however, said re-bidding will be done in case only the affiliates participate in the auction.
In February 2019, the government gave ONGC and Reliance Industries pricing and marketing freedom for yet-to-be-developed discoveries and agreed to levy a lesser royalty in case of state-owned firms raising production from existing fields.
(This report is an edited version of a PTI feed)