Kirit Parikh Committee report on gas prices. What can be expected

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Due to the pandemic and the recent geopolitical crisis, natural gas prices have rallied in the past few months. Consumers and user industries alike are bearing the brunt as they are heavily dependent on piped cooking gas, CNG for vehicles and gas for generation.

The government-led Kirit Parikh panel, which was set up to review the gas pricing formula, is likely to recommend complete liberalization of natural gas prices by January 1, 2026. The panel will submit its report on November 30, said a CNBC-TV18 report.
The Kirit Parikh panel was set up this September to review the gas pricing formula for gas produced in the country with the aim of ensuring fair prices even as global gas prices remain high. As per news reports, the draft recommendation will be presented and finalized by the panel members on November 29.

what to expect

According to the Petroleum Planning and Analysis Cell, prices in Delhi have increased by 52 per cent in just one year from Rs 35.11 per standard cubic meter (SCM) in September 2021 to Rs 53.59 per standard cubic meter (SCM) in October 2022. Sugar has increased by 57.9 per cent from Rs 49.76 to Rs 78.61 per kg during this period.

The major expectations from the report are as follows:

  • The committee is likely to recommend a price cap for the Administered Pricing Mechanism (APM) gas, including ONGC Ltd and Oil India Ltd. Gas from these legacy areas is sold to city gas distributors, who then hike CNG rates and piped cooking gas prices. ,
  • The panel is also expected to choose between two different pricing regimes.
  • The panel cannot comment on gas pricing from difficult gas fields, such as the Krishna Godavari Block D6 (KG-D6) field of Reliance Industries Limited. The rise in global energy rates hasn’t been added to the damage.
  • The report may recommend an annual increase of $0.5/MMBtu for the next few years.

gas pricing in india

Gas pricing is revised twice a year and is based on a rough estimate of the weighted average prices of four global benchmarks: US-based Henry Hub, Canada-based Alberta Gas, UK-based NBP and Russian Gas.

Globally, a sudden jump in gas prices has been observed between July 2021 and August 2022. Henry Hub prices in the US are set to increase by 140 percent between July 2021 and August 2022. The JKM marker, which oversees the Northeast Asian spot price index for LNG, and is determined by S&P Global Platts, posted a gain of around 257. Percent.

The UK’s NBP has seen a jump of 281 per cent. But in comparison, CNG and PNG prices in India have increased by only 50 to 60 per cent as they were protected from volatility in spot prices due to India’s long-term supply contracts. Natural gas prices in India increased by 40 per cent on 1 October as part of the government’s six-monthly review of prices.

(with agency inputs)

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