Cabinet approves revised domestic gas pricing guidelines

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Cabinet approves revised domestic gas pricing guidelines

Recently, the Union Cabinet has approved the revised domestic gas pricing guidelines based on the recommendations of the Kirit Parikh Committee.

Natural gas (both compressed and natural) produced from legacy or old fields is known as APM (Administered Price Mechanism) gas.

Now APM gas prices will be notified based on the price of imported crude oil.

The above guidelines will be applicable to gas produced from the following fields –

Areas allotted to ONGC / OIL; and New Exploration Licensing Policy (NELP) blocks and Pre-NELP blocks.

Benefits of the new guidelines as compared to the old pricing –

  • Stable gas prices will help keep domestic inflation under check.
  • India will be helped to move towards a gas based economy.
  • This will also bring down the cost of fertilizers, as gas is a major input material in its production.
  • This will reduce the subsidy burden on the government.
  • This will help encourage long-term investment in domestic gas exploration and production.

 Old Pricing System

  • The prices were fixed to the gas prices in the international market.
  • The prices were revised on a half yearly basis.
  • There was no base or upper limit on the price of gas.
  • In the old system no premium was allowed.

New Pricing System –

  • Under this, the price will be 10 percent of the monthly average of the Indian crude basket.
  • The prices will be notified on a monthly basis.
  • Administered Price Mechanism (APM) will be subject to base and ceiling price. This pricing mechanism will remain unchanged for 2 years.
  • The new guidelines allow 20 per cent premium over APM for gas produced from new gas fields.

Source – Indian Express

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