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New Delhi
The Cabinet Committee on Economic Affairs (CCEA) is set to consider the suggestions made by the Kirit Parikh committee on fair pricing of natural gas this week.
The Ministry of Petroleum & Natural Gas (MoPNG) bi-annually revises the price of natural gas produced from old fields, or the Administered Price Mechanism (APM) fields, and Deepwater, Ultra Deepwater and High Pressure-High Temperature (HPHT) fields. The next revision will become effective from April 1, 2023.
“MoPNG has accepted the recommendation of the Parikh committee and a cabinet note has been prepared which is likely to be taken up by the cabinet on Friday,” a senior government official said.
If the cabinet accepts suggestions of Parikh committee, the price from old fields will be fixed at 10 per cent of the monthly average of India’s crude oil basket. Around 70 per cent of India’s gas production comes from old fields.
Besides, this price will also have a floor of $4 per million British thermal units (mBtu) and ceiling of $6.5 per mBtu. At present, the APM price is $8.57 per mBtu, effective till March 31, 2023. These fields are operated by state-run ONGC and Oil India.
Another official said that in case the Cabinet decision is delayed, the present mechanism for calculating natural gas price from both fields will be applicable and the new mechanism as and when approved will come into effect retrospectively from April 1, 2023.
Benefits
The panel has recommended not tinkering with natural gas prices produced from HPHT fields such as in KGD6 run by Reliance Industries and BP, which at present is $12.46 per mBtu.
Industry has welcomed the Parikh committee recommendations as this will boost realisations of upstream companies with graded increases over the next five years and moving to full decontrol from January 1, 2027. From a consumer’s perspective, the price cut should result in a decline in CNG and PNG (domestic) prices and would benefit end consumers thereby stimulating demand.
Lower domestic gas prices would also reduce the government’s subsidy burden for fertilisers. Also, lower prices would lead to a more competitive cost of generation for domestic gas-based power generation projects. The inclusion of natural gas under GST would also reduce the incidence of stranded taxes.
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