The Union Cabinet on Thursday authorised a revision within the formulation for pricing of pure gas and imposed cap or ceiling value to assist lower CNG and piped cooking gas costs by up to 10 per cent.
Photograph: PTI Photo
Natural gas produced from legacy or outdated fields, often known as APM gas, will now be listed to the worth of imported crude oil as a substitute of benchmarking it to gas costs in 4 surplus nations such because the US, Canada and Russia, Union I&B Miniser Anurag Thakur instructed reporters after a gathering of the Cabinet.
APM gas will likely be priced at 10 per cent of the worth of basket of crude oil that India imports (Indian basket of crude oil).
The price such arrived at nevertheless will likely be capped at $6.5 per million British thermal unit.
There may also be a ground or base value of $4 per mmBtu.
The ceiling value is decrease than the present price of $8.57 per mmBtu and would translate into a discount in costs of piped cooking gas in addition to CNG bought to vehicles, he mentioned.
Piped cooking gas costs will likely be lower by up to 10 per cent throughout cities whereas CNG will see a little bit decrease discount, he mentioned.
Rates of piped cooking gas, known as PNG, and CNG have jumped 80 per cent in a single 12 months to August 2022.
This follows a spurt in worldwide vitality costs.
Following the choice, the CNG value in Delhi will likely be lower from Rs 79.56 per kg to Rs 73.59 and that of PNG from Rs 53.59 per thousand cubic meters to Rs 47.59.
In Mumbai, CNG will cost Rs 79 per kg as a substitute of Rs 87 and PNG will cost Rs 49 per scm as a substitute of Rs 54.
The Indian basket of crude oil is at the moment priced at $85 per barrel and 10 per cent of that interprets right into a value of $8.5 however the cap would imply the APM gas produces, ONGC and Oil India Ltd would get solely $6.5 per mmBtu.
These caps and ground costs will likely be for 2 years and charges will enhance by $0.25 per mmBtu per 12 months thereafter, the minister mentioned.
The modifications within the gas pricing formulation are primarily based on the suggestions of a committee below Kirit Parikh.
While the committee’s suggestion for ground and ceiling in addition to indexation has been accepted, the one on annual increment and full deregulation has been modified.
The panel had steered a 50 cents per mmBtu enhance within the $6.50 ceiling yearly to slowly transfer towards the advertising and marketing and pricing freedom for APM fields.
Asked concerning the deregulation, oil secretary Pankaj Jain mentioned the choices taken by the cupboard have been knowledgeable.
Also, charges will likely be mounted each month as a substitute of the present observe of fixing them bi-annually.
Currently, the federal government bi-annually fixes costs of regionally produced pure gas — which is transformed into CNG to be used in vehicles, piped to family kitchens for cooking and used to generate electrical energy and make fertilisers.
Two completely different formulation govern charges paid for gas produced from legacy or outdated fields of nationwide oil corporations like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), and that for newer fields mendacity in tough to faucet areas corresponding to deepsea.
The world spurt in vitality costs put up Russia’s invasion of Ukraine has led to charges of regionally produced gas climbing to report ranges – $8.57 per million British thermal unit for gas from legacy or outdated fields and $12.46 per mmBtu for gas from tough fields in six month interval ending March 31.
At the April 1 revision, the APM gas value was saved on maintain pending Cabinet approval for the change within the pricing formulation.
Had the outdated formulation continued, costs of gas from legacy fields would have climbed to $10.7 per mmBtu.
The value of gas from tough fields was lower to $12.11 per mmBtu.
The authorities had final 12 months constituted a committee below Kirit Parikh to take a look at a revision in gas costs that balances each native client and producer curiosity, whereas on the identical time advancing the nation’s reason for turning into a gas-based economic system.
While leaving the formulation for tough fields unchanged, the panel steered the worth band for present manufacturing from legacy or outdated fields, which make up for two-thirds of all gas produced within the nation and is at the moment below the administered value mechanism, or APM, till a full deregulation of costs is applied in 2027.
The panel steered a 50 cents per mmBtu enhance within the $6.50 ceiling yearly to slowly transfer towards the advertising and marketing and pricing freedom for APM fields.
Thakur mentioned the ceiling value covers for the cost of manufacturing of producers whereas defending customers notably CNG customers, kitchens utilizing piped cooking gas and fertilizer crops who had grappled with hovering enter cost.
APM gas makes up for many of CNG and kitchen gas provides.
India aspires to turn out to be a gas-based economic system with the share of pure gas in its main vitality combine focused to rise to 15 per cent by 2030 from the prevailing stage of round 6.3 per cent.
APM gas fields have been allotted to ONGC and OIL earlier than 1999.
Production from these fields don’t entice profit-sharing with the federal government, and their pricing formulation is benchmarked to gas costs at worldwide gas hubs in surplus nations each six months primarily based on the weighted common value.
Prices have been final revised on October 1 and are actually due for revision on April 1.
To incentivize further manufacturing from a brand new effectively or effectively intervention within the nomination blocks, the Kirit Parikh committee really useful a premium of 20 per cent over and above the APM costs for ONGC and OIL until full freedom.
This has been authorised by the Cabinet, he mentioned.
As a lot as 34 per cent of APM gas is allotted to the ability sector in 2021-22, 17 per cent to the fertilizer trade, which impacts meals costs, and 22 per cent to town gas sector.
The committee additionally really useful that gas ought to be introduced below the Goods and Services Tax, or GST, regime.
Having a typical taxation corresponding to GST for gas in lieu of state stage VATs, which differ from 3 per cent to as excessive as 24 per cent, will assist develop the market.
