KOLKATA (miningweekly.com) - The Indian government has agreed to a proposal for coalbed methane (CBM) operators to price their production on par with domestic natural gas, an official in the Ministry of Petroleum and Natural Gas said.

However, the pricing parity would only be effective after the government revised natural gas pricing, which has been hanging fire in the last year, the official said.

The price parity approval would be effective in the case of three CBM operators, Great Eastern Energy, Essar Oil and ONGC Limited. The approval in the case of Reliance Industries Limited (RIL) has been withheld with the government seeking additional information from the company.

Great Eastern Energy operated the Raniganj South block, Essar Oil the Raniganj East block and ONGC the Jharia block, all in eastern India.

The operators would have to price CBM on par with domestic natural gas only after the government was able to finalize rthe evision of gas prices, the official said.

While the final price of natural gas was yet to be decided by the government, it was likely that a uniform gas price, irrespective of source, would force CBM operators to lower their prices as most of them were charging a rate higher than current natural gas price of $4.2 per million British thermal unit (mBtu).

CBM operators’ prices ranged between $8/mBtu and $22/mBtu and they would have to lower it considering that it was unlikely that the present government would agree to doubling of natural gas price to $8.4/mBtu.

The previous Indian government had announced doubling of natural gas prices from the current rate of  $4.2/mBtu effective from April 2014.

This was, however, kept in abeyance by the Election Commission of India in view of the national elections and, at the same time, the sharp hike in natural gas prices has been entangled in political and legal challenges.

The new Indian government, on assuming charge in May, opposed the gas hike proposals of the previous dispensation and set up a new panel to frame a gas pricing mechanism by August 31. The Ministry has set a deadline of October 1, to complete fresh consultations with various stakeholders and announce a higher gas price.

This, in effect, scrapped the recommendations made by two previous panels based on which the previous government had settled on the doubling of gas prices.

In a related development, the Petroleum and Natural Gas Ministry has identified ten CBM blocks to be put up for auction for bidding by private operators. Six of the blocks were in the western Indian province of Gujarat, two in Madhya Pradesh in the central region and the rest in Maharashtra.

As on date, 33 CBM blocks had been awarded for exploration through competitive bidding of which eight have been declared under development with total established reserves of 9.9-trillion cubic feet.

According to ministry data, coal bed methane production in the country during April-June 2014 was estimated at 0.58-million standard cubic meters per day and forecast to increase to four-million standard cubic meters a day by 2017.