Kirit Parikh committee may seek more time to submit the report on natural gas pricing

28 Sep 2022 , 07:14 AM

In order to walk the tightrope of balancing the expectations of producers and consumers, the government-appointed panel charged with assessing the pricing of natural gas has asked for more time to present its findings, according to news reports.

By the end of September, the panel, which is led by former planning commission member Kirit S. Parikh, was required to propose a “fair price to the end-consumer.”

Given the scope of the task, the committee requested an additional 30 days to complete the report; nevertheless, the administration has set a deadline of mid-October for completion, according to news reports.

A fossil fuel that is developed deep within the earth’s crust is natural gas. It is used to make fertilizer, convert it into compressed natural gas (CNG) for use in automobiles, and pipe it into homes’ kitchens for heating and cooking.

The cost of production for user industries in general and city gas operators, who sell CNG to autos and piped cooking gas to households in particular, has increased as a result of its prices, which were docile until last year but have rocketed up recently.

The government established the committee to study how the prices of gas generated in India are fixed in order to keep rates in check and prevent them from fuelling already high inflation.

The panel consists of representatives from the gas producers association, state-owned producers ONGC and OIL, a member from the fertilizer ministry, private city gas operators, state gas utility GAIL, an Indian Oil Corporation (IOC) representative, and a member from private city gas operators.

The Modi administration developed a formula for domestic gas production in 2014 using pricing in gas-exporting nations. According to this, rates are fixed every six months on April 1 and October 1 of each year, with a one-quarter lag, based on rates common in countries with gas surpluses like the US, Canada, and Russia.

It was more than doubled to USD 6.1 per mmBtu on April 1 for gas from old fields, which are primarily produced by state-owned companies like ONGC and Oil India Ltd. It is anticipated that this price would surpass USD 9 per mmBtu at the upcoming review due on October 1.

Similar to this, from April 1 onward, the prices paid for gas from challenging fields like Reliance Industries’ deep sea KG-D6 increased to USD 9.92 per mmBtu from USD 6.13 per mmBtu. Next month, they’re anticipated to increase to USD 12 per mmBtu.

By 2030, the government plans to increase natural gas’s proportion in the primary energy mix from its present 6.7% to 15%.

Additionally, it will increase the cost of producing electricity, however, customers might not notice a significant increase in costs given how little power is produced using gas currently.

Similar to how the cost of making fertilizer will climb, an increase in rates is unlikely because the government subsidizes the crop nutrient.

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