The government is likely to hike natural gas rates from July 1 after a new price formulation is approved by the Cabinet, a top Oil Ministry source said today.

The first increase in natural gas prices, based on a formula suggested by a panel headed by C Rangarajan, was to be originally effective from April 1.

However, before a new rate could be unveiled, general elections were announced and its implementation got deferred.

"It (gas price revision) is an issue which needs attention. Decision needs to be taken before July 1," the source said.

The ministry had on April 21 told Reliance Industries, who was made to sell natural gas from its eastern offshore KG-D6 fields at the old rate of $4.2 per million British thermal unit even after its term had expired, that a new rate would be announced by July 1.

"We had told RIL that the earliest possible date for applying the revised price is July 1 and so we have to announce a new price before that," he said.

The Ministry will announce a new rate once its gets clarity on implementation of the Ranagarajan formula, which would double the gas price, from the top.

"Perhaps we may have to go to the Cabinet we would have more clarity on the issue by next week, say by Tuesday," the source said.

The ministry is expected to make a presentation on the issues pertaining to the oil and gas sector to Prime Minister Narendra Modi in next few days and a clear direction on how to proceed on gas pricing will emerge after that.

"Yes, a decision on gas pricing is on top of the items needing decision in the presentation," he said.

If the Prime Minister gives a go ahead for announcing a new rate as per the Rangarajan formula approved by the previous government in December last year, an announcement will be made forthwith.

However, if it is felt that the formula suggested needs some adjustment or the government needs to take steps to protect interests of users in power and fertiliser sector, then consultations at the level of Cabinet may happen.

Before being voted to power, the BJP had stated that it would like to review the formula if it comes to power.

Rangarajan panel had suggested pricing of all domestically produced natural gas at an average of the prices of imported liquefied natural gas (LNG) into India and the weighted average of gas prices in North America, Europe and Japan.

The price formula was to be effective on April 1, 2014 for a period of five years, with the price being revised quarterly using the approved formula.

The price for each quarter will be calculated based on the 12-month trailing average price with a lag of one quarter (i.e. Price for April to June 2014 will be calculated based on the averages for the 12 months ended December 31, 2013).