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Kirit Parikh Panel recommends $4-6.50/unit gas price band for old fields

Report recommends market-determined prices for domestically produced gas from January 1, 2027.

November 30, 2022 / 05:25 PM IST
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The government-appointed gas price review panel headed by Kirit Parikh on November 30 submitted its report recommending a floor of $4 per (Metric Million British Thermal Unit) and a cap of $6.50/mmBtu for legacy and old fields fields being operated by Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL).

According to the report, by January 1, 2027, the cap and the floor would be removed and the prices would be market-determined for gas which is currently under Administered Pricing Mechanism (APM). The government will now deliberate on the report and consider converting it into policy.

For the gas from difficult fields such as those lying in deepsea or which are in high-pressure, high-temperature zones, the committee has suggested no tinkering with the existing mechanism of paying them higher rates based on a different formula to compensate for the greater risk and cost involved. These fields have by and large pricing freedom but are constrained by an upper cap that the government prescribes and updates from time to time. The Krishna Godaveri block D6 (KG-D6) fields of Reliance Industries Ltd and its joint venture partner bp plc are governed by the pricing formula for difficult fields that will remain unchanged for now. However, the report suggests that the upper cap should be removed from January 1, 2026.

“The whole idea to do all this is that we wanted to make sure that the government’s target of 15 percent of gas in the Indian economy by 2030 has a chance of fullfilment. That requires that we produce a lot of domestic gas. Currently only 6 percent of our total energy is from gas and we are importing 50 percent of gas,” Parikh told CNBC-TV18.