Mumbai: The prime minister''s economic advisory committee (EAC) has cleared the price set by Reliance Industries Ltd (RIL) for natural gas from its Krishna Godavari block, but suggested a review of the limited bidding exercise carried out by the company for fixing prices.

The EAC said RIL''s $4.33 per mBtu price of gas from KG-D6 fields was in line with industry practices and priority allocation to fertilizer and power sectors should be at market prices.

In fact, the panel said, RIL''s 2004 offer price for NTPC at $2.97 mBtu was lower than "the current discovered market price" and that comparable crude oil prices now were significantly higher than what they were then.

The delivered price of RIL gas of $5.5 to $6.2 per mBtu translated into a power generation cost of Rs2.2-2.5 per unit. This is slightly higher than the cost of using domestic coal (Rs2-2.34 per unit) but lower than that of imported coal (Rs2.75-2.9 per unit), the committee headed by former RBI governor C. Rangarajan said in its report.

The price would also result in substantial savings in subsidy when fertilizer plants using more expensive naphtha, fuel oil and LNG switch over to RIL fuel, the report said.

The panel said RIL''s invitation had confined to only power and fertilizer units along its Kakinada-Ahmedabad pipeline, having a minimum consumption of one million standard cubic metres.

Had open bids been invited from all consumers, including refineries, steel plants and glass units, who burn expensive naphtha and fuel oil, the gas price would have increased by at least one dollar per mBtu, sources pointed out.

The committee''s review comes ahead of a decision by the empowered group of ministers (EGoM) set up to decide on issues of pricing and commercial utilisation of all gas produced from blocks awarded under the new exploration and licensing policy (NELP).