Oil ministry to pitch for gas pricing changes: govt source

A technician opens a pressure gas valve inside the Oil and Natural Gas Corp (ONGC) group gathering station on the outskirts of Ahmedabad March 2, 2012.

NEW DELHI (Reuters) - The oil ministry will soon recommend a revision in local gas prices, a government source said, which if accepted would bring a windfall for state-run producers - Oil and Natural Gas Crop(ONGC.NS) and Oil India(OILI.NS).

"The minister has already said that the oil ministry has accepted the recommendation of the Rangarajan Committee and we will soon send it for cabinet's consideration," an oil ministry source said, adding his ministry would not suggest the scale of any price rise.

A panel headed by C. Rangarajan, chairman of the Economic Advisory Council to the prime minister, has suggested linking local gas prices with liquefied natural gas, U.S.'s Henry Hub, the UK's National Balancing Point and Japan Customs cleared prices.

To see the committee's full report, click: here

The oil ministry is in the process of preparing a note for a ministers' meeting on gas pricing, which is on a par with the cabinet, this source said.

Any price revision will not be applicable to gas produced from Reliance Industries' (RELI.NS) operated D6 block on the east coast, where pricing has been fixed until April 2014 output has been falling.

Higher gas prices may stoke inflation and hit power and fertiliser companies which buy the bulk of the gas sold at government-fixed rates.

India in 2010 raised the base price of natural gas produced by state-firms from blocks allocated to them without competitive bidding to $4.2 per million British thermal units, the same rate for Reliance's gas.

(Reporting by Nidhi Verma; editing by Jason Neely)