While London-based oil major BP is preparing to invest $4-5 billion in the country’s most prolific KG D6 gas block to increase output over the next few years, its group economist has cautioned that the gas pricing scenario prevailing in the country is a hindrance for investments.
Christof Ruhl pushed for a competitive pricing mechanism which will boost the energy sector.
“The current gas prices prevailing in India is not remunerative enough. Artificially depressed rates is making investments unattractive in the country,? Ruhl said in a conference on Monday.
He further emphasized that the government should reduce domestic subsidies and create an environment where prices will be determined by the forces of demand and supply and bring in more players and increase competition.
?The government could reduce subsidy in a phased manner gradually… from city to city or grid to grid,? he said.
In 2009, an empowered group of ministers fixed $4.2/mmbtu as the price of gas produced from KG D6 gas fields. The price of gas was fixed for the period of 5 years and is suppose to come up for revision only in 2014.
Earlier, Reliance Industries had written a letter to the oil ministry and to the Prime Ministers office demanding a revision in price stating the price of gas globally has gone up significantly as compared to the price they are operating now.
The company is demanding a revision in price at a time when the output from it’s most prolific KG D6 field is constantly declining.
