Govt sets up Kirit Parikh committee to moderate gas prices

The government has set up a panel to review the formula that dictates the pricing of gas produced by companies like ONGC and Reliance as it looks to moderate the steep increase that producers would have otherwise got. The committee under former planning commission member Kirit S Parikh will suggest a "fair price to the end consumer", according to an order of the oil ministry.

The panel, which will include representatives of the gas producers association as also producers ONGC and OIL, has been asked to submit its report by the month-end. It also has a member from private city gas operators, state gas utility GAIL, a representative of Indian Oil Corporation (IOC) and a member from the fertiliser ministry, the order said.

The government had in 2014 used prices in gas surplus countries to arrive at a formula for locally produced gas. The rates according to this formula were subdued and at times lower than the cost of production till March 2022 but rose sharply thereafter, reflecting the surge in global rates in the aftermath of Russia's invasion of Ukraine. The prices, which are payable to producers like Reliance Industries as well as state-owned Oil and Natural Gas Corporation (ONGC) are due for revision on October 1 and are expected to go up further.

The price of gas from old fields, which are predominantly of state-owned producers like ONGC and Oil India Ltd, was more than doubled to USD 6.1 per million British thermal unit from April 1 and is expected to cross USD 9 next month. Similarly, the rates paid for gas from difficult fields such as deepsea KG-D6 of Reliance went up to USD 9.92 per mmBtu from April 1 against USD 6.13.

Gas is an input for making fertiliser as well as power. It is also converted into CNG and piped to household kitchens and a rise in its prices fuelled inflation. The panel has been asked to recommend a fair price to end-consumers and also suggest a "market-oriented, transparent and reliable pricing regime for India's long-term vision for ensuring a gas-based economy," the order said.

The government wants to more than double the share of natural gas in the primary energy basket to 15 per cent by 2030 from the current 6.7 per cent. Sources said the recommendations of the committee will after vetting be taken to the Cabinet for approval.

The new formula would be implemented once the Cabinet gives a go-ahead.