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Kirit Parikh Committee report on gas prices. What can be expected
The Kirit Parikh panel was set up this September to review the gas pricing formula for gas produced in the country with the aim to ensure a fair price even as global prices for gas remained high.
Due to the pandemic and the more recent geopolitical crisis, natural gas prices have shot up in the past few months. Consumers and user industries are facing the brunt alike as they depend heavily on piped cooking gas, CNG for vehicles, and gas for production.
The government-led Kirit Parikh panel, which was set up to review the gas pricing formula, is likely to recommend a complete liberalization of natural gas prices by January 1, 2026. The panel will submit its report on November 30, a CNBC-TV18 report stated.
The Kirit Parikh panel was set up this September to review the gas pricing formula for gas produced in the country with the aim to ensure a fair price even as global prices for gas remained high. As per news reports, the draft recommendation will be tabled and finalised by the panel members on November 29.
What to expect
According to Petroleum Planning & Analysis Cell, prices in Delhi have risen 52 per cent in just over a year to Rs 53.59 per standard cubic metre (SCM) in October 2022 from Rs 35.11 per standard cubic metres (SCM) in September 2021. CNG prices have shot up 57.9 per cent during this period to Rs 78.61 per kg from Rs 49.76.
The key expectations from the report are as follows:
The committee is likely to recommend a price cap for Administered Pricing Mechanism (APM) gas, including for ONGC Ltd and Oil India Ltd. Gas from these legacy fields is sold to city gas distributors, who then raise the CNG rates and piped cooking gas prices.
The panel is also expected to opt for two different pricing regimes.
The panel may not comment on the gas pricing from difficult gas fields, like the Krishna Godavari block D6 (KG-D6) fields of Reliance Industries Ltd. As this would ensure that explorers, who are seeing a surge in the cost of services due to the spike in global energy rates, are not put at a disadvantage.
The report may recommend an annual escalation of $0.5/mmbtu for the next few years.
Gas pricing in India
Gas pricing is revised twice a year and based on rough estimate from the weighted average prices of four global benchmarks: the US-based Henry Hub, Canada-based Alberta gas, the UK-based NBP, and Russian gas.
The gas prices have seen a sudden surge between July 2021 and August 2022 globally. The Henry Hub price in the US has shot up 140 per cent between July 2021 and August 2022. The JKM Marker, which oversees the Northeast Asian spot price index for LNG, and is determined by S&P Global Platts, has registered an increase of almost 257 per cent.
The UK’s NBP has seen a surge of 281 per cent. But in comparison, prices of CNG and PNG in India have only gone up 50 to 60 per cent as they were guarded against spot price fluctuations because of India’s long-term supply contracts. In India, prices of natural gas increased 40 per cent on October 1 as part of the government’s six-monthly review of prices.
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