Kirit Parikh Committee on Gas Pricing
December 04, 2022
The Kirit Parikh group just published its report on gas pricing, which recommends total price independence beginning January 1, 2026.
What are the panel's main recommendations?
The committee suggested that natural gas taken from legacy fields, which account for more than 70% of total natural gas generated in India, be entirely free and market-determined.
The group proposed that the price of gas generated from legacy assets be linked to imported crude oil prices rather than benchmarked to global gas rates. The rates that are agreed at will be subject to a floor and ceiling.
For gas from the old legacy field, the panel proposed a price range of $4 to $6.50 USD per unit. This implies that ONGC and Oil India Limited will be paid a price related to imported oil, with a minimum or floor price of 4 USD per million British thermal unit (mmBtu) and a ceiling price of 6.5 USD per mmBtu.
A set pricing band will result in predictable pricing for producers as well as reasonable cost for CNG and piped cooking gas.
The panel also suggested raising the ceiling tariff for legacy field gas by 0.5 per mmBTU.
By January 1, 2027, it suggested market-determined price for gas generated from legacy fields.
It did not suggest any modifications to the present price mechanism for complex geology areas like as Reliance Industries' KG-D6.
Deep sea, high temperature, high-pressure zones are now regulated by a distinct formula that incorporates an element of imported LNG cost. They are, however, subject to a price cap of 12.46 USD. The group suggested lifting the cap and giving such areas total price freedom beginning January 1, 2026.
The panel proposed including natural gas under the GST scheme by combining the Centre's excise duty and the states' VAT.
To address states' worries about revenue loss, the panel advised establishing a system akin to the 5-year compensation cess regime, which cushioned states' losses without giving up their authority to impose VAT and other taxes on goods and services.
The group also suggested lowering the excise duty rate.
