A group of ministers will meet on Wednesday to discuss the revision of natural gas prices after a gap of four years and consider change in the country's main trunk gas pipeline HBJ's transportation tariff.

The GoM will discuss increasing the domestic natural gas prices from the current cap of Rs 2,850 per thousand cubic meters to a level "acceptable to the major consuming power and fertiliser sectors," official sources said in New Delhi on Tuesday.

"The GoM may fix a price between Rs 3,250 per thousand cubic meters and Rs 3,500 per thousand cubic meters," they said, adding a committee of secretaries, which went into the issue of gas pricing at the request of GoM, has suggested a hike of a minimum Rs 400 per thousand cubic meters.

The new price, which will be applicable to the natural gas produced by Oil and Natural Gas Corp and Oil India Ltd from the current fields, will remain static for the next two years.

In the meantime, a tariff committee would be set up to study the costs and suggest a reasonable price for the period till the complete deregulation of gas prices came about.

However, the two state-run firms will have the freedom to sell gas from the joint venture fields like Tapti offshore field at the market rates.

Sources said the GoM might also consider increasing the HBJ gas pipeline transportation charges of Rs 1,150 per thousand cubic meters per day.

"HBJ charges may go up at the rate of Rs 3.35 for every Rs 100 per thousand cubic meter increase in the gas price," they said.

While the natural gas produced from all the joint venture fields would attract market based pricing, the system would not apply for the 1 million standard cubic meters per day of gas produced from Cairn Energy of the United Kingdom-operated Ravva field "as it will have a severe impact on the power consumers in Andhra Pradesh."

The CoS, sources said, has favoured the de-linking of gas produced from the JV fields like Panna-Mukta and Tapti on the West coast, which is fed to the HBJ pipeline system. The HBJ pipeline system connects the gas-rich western offshore to the consumption centres in the north.

"For new fields and additional production of gas over and above the current level of production by ONGC and OIL, the price will be de-linked from the administered price mechanism and would be market-determined," it suggested.

At the CoS deliberations, the petroleum ministry wanted the price to be raised to Rs 3,850 per thousand cubic meters but the ministries of power and fertiliser wanted an increase of only Rs 400.

Under the current policy, gas produced by ONGC and OIL is capped at Rs 2,850 per thousand cubic meters. For the gas produced from the joint venture fields like Ravva, Cairn Energy of UK (operator of the field) is paid the international price, while ONGC sells the same gas to its customers at the cap price, thereby providing a subsidy of Rs 1,300 crore (Rs 13 billion) annually.