Centre approves new gas pricing formula | Fusion - WeRIndia

Centre approves new gas pricing formula

Centre approves new gas pricing formula

The central government has given the nod to a new gas pricing formula to regulate the prices of piped cooking gas.

The Kirit Parikh committee on natural gas had submitted recommendations in this regard. They have now been implemented.

As per the new guidelines, natural gas produced from old fields or administered pricing mechanism (APM) gas will be indexed to crude oil prices rather than gas prices in surplus countries.

This move is expected to reduce the price of APM gas, which will now be capped at $6.5 per million British thermal unit. The price will be decided monthly instead of bi-annually.

Additionally, gas produced from new wells or well interventions in the nomination fields of the Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) will be permitted a 20% premium over the APM price.

The revised guidelines are expected to lead to a significant reduction in piped gas prices. These include natural gas (PNG) for households and compressed natural gas (CNG) for transportation.

The new pricing mechanism aims to stabilize pricing for domestic gas consumers. At the same time, they intend to protect producers from market fluctuations and offer incentives for production enhancement.

Furthermore, the government hopes to increase the share of natural gas in the primary energy mix from 6.5% to 15% by 2030. Eventually, it aims to promote natural gas consumption and help achieve emission reduction targets.

The reduced gas prices will have a positive impact on the fertilizer subsidies burden and the domestic power sector. The ONGC and the OIL will be incentivised to make long-term investments in the upstream sector. Besides, it will lead to increased natural gas production and reduced prices.

The Kirit Parikh committee had suggested the complete liberalisation of natural gas prices by January 1, 2027. Its recommendations have been taken into account with the new guidelines.

The new gas pricing formula will make natural gas more affordable and accessible for Indian consumers. At the same time, it will also promote investment in the energy sector.

The revised guidelines aim to increase the consumption of natural gas. Also, they aim to aid in the achievement of emission reduction targets and promote energy security in the country.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Reference: https://pxhere.com/en/photo/1612611

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