The Government Has Approved The Recommendations Of The Kirit Parikh Panel On Natural Gas Pricing

The Government Changed The Pricing Model For Domestic Natural Gas In Accordance With The Recommendations Of The Kirit Parikh Panel Committee On Gas Pricing

Accordance with the recommendations made regarding gas pricing by the Kirit Parikh panel committee, the government made adjustments to the pricing structure for domestic natural gas. The new pricing structure will release prices on a monthly basis and link them to 10% of the global price of the basket of Indian crude oil. As a result, it is anticipated that prices for piped natural gas (PNG) and compressed natural gas (CNG), which are used by households, automobiles, and a variety of industries, will drop by 10%.

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Principal suggestions made by the Kirit Parikh panel on natural gas pricing:

The government has adopted all of the Kirit Parikh panel‘s major recommendations and set a floor price of $4 per MMBtu for the following two years to cover the cost of gas production by the government-run firms ONGC and Oil India Ltd. A ceiling price of $6.5 per MMBtu has also been established.Significant adjustments to the domestic natural gas pricing structure within the framework of the administered price mechanism were approved by the Union Cabinet. (APM).

The price of natural gas produced by oil and gas companies is determined by the APM, according to the Indian government Since November 1, 2014, the price of APM gas, which makes up roughly two-thirds of India’s natural gas production, is decided using the “modified” Ranga rajan formula.

The majority of the gas produced by legacy fields, also known as nomination fields, of national oil companies Oil and Natural Gas Corporation (ONGC) Ltd. and Oil India Ltd. will be affected by these changes. (OIL).Before 1999, when auctions replaced government awards of oil and gas blocks, the government gave ONGC and OIL acreages known as “nomination fields.”

This development is significant because APM petrol prices are correlated with crude oil prices.The APM petrol prices will be correlated with crude oil prices under the new system.

These days, the majority of natural gas contracts made across the globe follow this common practise.It has greater real-time liquidity in the global trading markets and is more pertinent to India’s consumption basket.

addressed the time lag issue

With the modifications to the pricing formula, the APM petrol price would be determined using information from the previous month’s Indian crude basket price.Try to strike a balance between producer and consumer demands.

ONGC and OIL have been pleading with the government for a floor price over the past few years because they were compelled to sell petrol at a loss for an extended period of time when prices persisted below their cost of production.

On the other hand, gas-using industries had been pressuring the government to make domestic natural gas affordable.

Therefore, it makes an effort to achieve balance by introducing a ceiling and floor price.

Significantly reduced PNG and CNG prices

Prices for compressed natural gas (CNG) for transportation and piped natural gas (PNG) for homes will both significantly drop as a result of the reforms.

The decreased costs will also benefit the domestic power sector and ease the burden of fertiliser subsidies.