Natural gas prices in the economy are expected to rise as a panel led by the Prime Minister’s Economic Advisory Council chairman C Rangarajan has asked for linking domestic prices to an average of international hub prices and the cost of imported LNG.

The report submitted to Prime Minister Manmohan Singh has also suggested scrapping the cost recovery clause in production sharing contracts (PSCs) the government signs with exploration companies in future. Instead it has suggested the share of the contractor should be determined through a competitive bid process. The recommendation is expected to avoid tussles like that of the oil ministry with Reliance Industries Ltd where the difference in cost recovery formula has almost led to arbitration.