The ministry in earlier occasions rejected Reliance Industries' (RIL) request to hike the price of gas, the most recent in January this year.
RIL, along with British energy major BP and Canadian partner Niko, operates the KG-D6 gas block.
Sources told NDTV that the Petroleum Ministry - in a communication dated October 10, to power, fertiliser and law ministries, along with various departments of the Finance Ministry - seeks comments on the issue.
Oil ministry, in its note, says that the present price of $4.2/unit was decided by the EGoM in 2010 for five years ending in March 2014.
This EGoM note may bring some relief to RIL, as before this the Petroleum Ministry had always rejected the request of a price hike.
Now, at least the Petroleum Ministry has sent the proposal to the concerned ministries so that a view can be taken on the gas pricing.
However, in its note, the Petroleum Ministry has highlighted some numbers which may make it difficult for the EGoM to favour any kind of a price hike.
Sources say the Ministry in its note says RIL has proposed the price to be hiked to $14.2-$14.5/mmbtu for KG-D6 gas. However, the Petroleum Ministry also says that the price hike of over $10/mmbtu will give $8.5 billion benefit to RIL, NIKO and BP, whereas the government's revenue will only go up by $1.4 billion in two years.
The price hike will also put a burden of $10 billion on power and fertiliser sectors, which essentially are the biggest user of the KG-D6 gas.
Apart from this, the overall impact on the government's subsidy bill will also go up by $6 billion, if the price goes up by $10/mmbtu
In its note, the ministry also cited the Supreme Court verdict in the RIL-RNRL case, which says: “Though the contractor has the marketing freedom to sell the product from the contract area to other consumer, this freedom is not absolute. The price at which the produce will be sold to consumers would be subject to the the government's approval”.
In the same context, the Petroleum Ministry note says that the Attorney General has also vested the final say on the price revision before 2014 to the EGoM.
The Petroleum Ministry also seeks comment of the various govt departments on re-allocation of KG-D6 gas to various sectors, as the gas production from KG-D6 block has gone down.
In fact, the note says that the average production will not be at the optimal level of 37.5 million units of gas per day (mmscmd) and it is expected to come down to 25.08 mmscmd by the end of 2012-13 and further down to 18.7 mmscmd in 2013-14.