The government on Thursday amended the domestic pricing model of natural gas in line with the recommendations of the Kirit Parikh committee on gas pricing.
Prices of domestic natural gas will now be announced every month, and be pegged at 10 per cent of the international price of the Indian crude basket. The move is expected to reduce by 10 per cent the prices of piped natural gas (PNG), supplied to households, and compressed natural gas (CNG), used as auto fuel and by various industries.
Accepting all the major recommendations of the Parikh panel, the government has approved a floor price of $4 per MMBtu (metric million British thermal units) for the next two years, to cover the cost of gas production by state-run firms Oil and Natural Gas Corporation (ONGC) and Oil India Ltd.
The ceiling price will be set at $6.5 per MMBtu.
Both the floor and ceiling prices will be increased yearly by about $0.5 per MMBtu, Petroleum Secretary Pankaj Jain said.
He said domestic gas producers would get up to a 20 per cent premium on higher production through reinvestment in nominated fields.
Meanwhile, the government has decided not to tinker with the existing pricing formula for difficult fields such as KG-D6 of Reliance Industries and BP PLC. About 83.3 per cent of India’s natural gas is produced by ONGC and Oil India Ltd, while the remaining 16.7 per cent is by private companies and joint-venture entities.
Aimed at expanding the domestic production of natural gas and encouraging technological innovation, the new regime is aimed at balancing the interests of producers and consumers, Minister for Information and Broadcasting Anurag Singh Thakur said. India currently imports 50 per cent of its natural gas requirements.
An amendment to the domestic gas pricing guidelines, 2014, will see the changes in rules through, he said.
Global price rise
Under the existing guidelines, the price of domestic supplies from fields given under the older nomination bloc regime and the New Exploration and Licensing Policy (NELP) is a weighted average of prices at international gas hubs. This administered price is revised every six months.
Thakur pointed to the massive rise in international gas prices as the trigger behind the government’s decision. Pegged to international benchmarks, domestic gas prices had risen from $1.79 per MMBtu on October 1, 2020, to $8.57 per MMBtu on October 1, 2022.
The committee had said India should have a free and market-determined pricing for natural gas extracted from legacy fields and remove all caps by January 1, 2027. The government has not given its decision on this recommendation.