Domestic gas producers must have complete pricing freedom, recommends govt-appointed panel

(Representative image)

The Kirit Parikh committee, the government-appointed panel to review the gas pricing formula, on Wednesday recommended a floor of $4 for legacy gas fields and suggested that a cap of $6.50/mmBtu be put on gas prices sold by ONGC and Oil India.

While the ceiling price recommended in the report submitted to the Oil Ministry is $6.50/mmBtu and it will be gradually raised by $0.50/mmBtu every year, Kirit Parikh told CNBC-TV18 in an exclusive interview.

He noted that while the administered pricing mechanism (APM) gas pricing is still determined by the government on the basis of a formula, domestic producers must have complete pricing freedom, which is the only way to up local production. He added that APM gas price is expected to come down from $8.50/mmBtu.

“We want to provide adequate returns to city gas distribution companies,” he said, adding that the panel has proposed complete liberalisation of APM gas by January 1, 2027. Difficult gas fields should see liberalisation by January 1, 2026.

Parikh pointed out that India needs to increase its share of gas consumption from 6 percent currently and needs to protect consumers from getting implicitly subsidised gas. He added that lowering import prices will impact domestic producers and the government should look at giving complete freedom on pricing.

The Kirit Parikh panel has sought a link in the gas price to imported oil. In addition, the panel believes gas must be included in GST, stake compensation should be for five years and the caps on gas prices must be removed in three years.

"Another 20 percent increase in capacity will come the year after. Import prices coming down will impact domestic producers. We have given a timeframe of 3-4 years to account for volatility," Parikh added.

He also suggested that the government should gradually get out of the gas allocation business.

The Oil Secretary has said the government will review gas price panel recommendations.