Mumbai, Sept. 13: Brokerages like the look of the formula for gas pricing that the empowered group of ministers approved yesterday which will serve as a benchmark for all new gas finds.

The decision to fix the price of the KG basin gas at $4.2 per mBtu is being seen as a big positive for Reliance Industries Ltd (RIL). In a report titled “Gas pricing no longer uncertain — A major positive’’, Morgan Stanley said it had an overweight rating on RIL, which finished at Rs 2,026.50, a gain of Rs 13.55 on the BSE today.

But the brokerage said there were some issues that had not been addressed. While the EGoM had said the price would be fixed for the first five years, it was silent on what would happen to the formula thereafter. It said two possibilities could emerge: first, there could be a 5 per cent escalation in prices every five years or, second, the formula could be linked to inflation with a reset clause every five years.

It said the circular didn’t mention the dollar parity assumption for the price. Here too, it could be based on the current exchange rate or a fixed exchange rate, with or without annual revisions.

Though an earlier EGoM report had suggested an exchange rate of Rs 45 per dollar, the recent EGoM circular did not comment on this issue. Assuming the exchange rate of Rs 45 per dollar as mooted earlier, the brokerage estimated that the weighted average price for RIL’s gas would come to $4.1 per mBtu.