The government on Wednesday allowed complete marketing freedom for natural gas produced from non-regulated fields, including sale to affiliate companies.
The Union Cabinet, headed by Prime Minister Narendra Modi, approved a standard e-bidding procedure to discover price of gas.
While producers will continue to be barred from participating in such auctions, affiliates would be allowed to bid, Oil Minister Dharmendra Pradhan told reporters.
However, the existing pricing mechanism for gas produced by state-owned ONGC and Oil India Ltd from fields given to them on a nomination basis would continue.
The marketing reform would help add 40 metric million standard cubic metres per day (mmscmd) of production to the existing output of 84 mmscmd, he said.