Finance Ministry has returned an oil ministry proposal to allow market price for part of the natural gas produced by firms like Oil and Natural Gas Corp (ONGC) and Reliance Industries from difficult fields.

“Finance Ministry has made certain observations on the proposal and returned it without approval,“ a top source with direct knowledge of the development said.

The government, while approving a new gas pricing formula based on international hub rates in October last year, had decided that new gas discoveries in deep-water, ultradeep sea or high-temperature and high-pressure fields will be given a premium over and above the approved price.

The oil ministry was asked to determine the premium to be paid to discoveries made post October 2014.

Based on a recommendation from its upstream technical arm, the ministry proposed to allow a fixed percentage of natural gas produced from difficult fields to be sold at market price and the remaining as per the approved price.

While the current domestic gas price is $4.66 per million British thermal unit, the market price as measured by the rate at which the fuel is imported, is $7-8.

The source said the finance ministry in its comments stated the premium should be consistent with the October 2014 Cabinet decision. Following this, the oil ministry has resubmitted the proposal the proposal explaining that the premium proposed was consistent with the October 2014 decision of the Cabinet Committee on Economic Affairs.

“The percentage of total volumes that can be sold at market price will be different for ultra-deep sea discoveries, deep-sea finds and high-temperature and high-pressure (HTHP) fields,” the source said without elaborating.

All gas producers stated it was uneconomical to produce gas from difficult fields at the current price of $4.66 per mmBtu, the source said.