"The minister has already said that the oil ministry has accepted the recommendation of the Rangarajan Committee and we will soon send it for cabinet's consideration," an oil ministry source told Reuters.
ONGC shares were up 3.6 per cent at Rs 344.85 on the BSE as of 09.52 a.m. while Oil India, another state-run producer, traded 2 per cent higher at Rs 544.
A panel headed by C. Rangarajan, chairman of the Economic Advisory Council to the prime minister, has suggested linking local gas prices with liquefied natural gas, U.S.'s Henry Hub, the UK's National Balancing Point and Japan Customs cleared prices.
Meanwhile, Bank of America Merrill Lynch upgraded ONGC to "buy" from "neutral" and raised its target price on the stock to Rs 381. BofA-ML also raised its FY14-15E earnings per share by 5-11 per cent. ONGC will also gain from gradual diesel deregulation, the investment bank added.
Any price revision will not be applicable to gas produced from Reliance Industries' operated D6 block on the east coast, where pricing has been fixed until April 2014 output has been falling.
Reliance Industries shares were down 0.44 per cent to Rs 919.35.
The government in 2010 raised the base price of natural gas produced by state-firms from blocks allocated to them without competitive bidding to $4.2 per million British thermal units, the same rate for Reliance's gas.
(With inputs from Reuters)