KIRIT PARIKH PANEL - COMMITTEES
News: Kirit Parikh panel submits gas report, suggests pricing freedom beginning Jan 2026
What's in the news?
● A
government-appointed gas price review panel, led by Kirit Parikh submitted its
report to the government, recommending a
floor and ceiling price for legacy fields and complete pricing freedom starting
January 1, 2026.
● Currently,
fields in deep sea or in high-temperature, high-pressure zones are governed by
a different formula that includes an element of imported LNG cost but the same
is also subject to a ceiling.
● The
committee was tasked with suggesting a "fair
price to the end-consumer" while ensuring a "market-oriented,
transparent and reliable pricing regime for India's long-term vision for
ensuring a gas-based economy".
● The committee's mandate was to suggest a regime that would help raise domestic production to help meet the goal of 15% of energy coming from gas by 2030 along with providing a fair price to consumers.
Key takeaways from the Kirit Parikh Panel's Recommendations:
1. Linking the price of gas with state-owned firms
rather than imported crude oil prices:
● The
panel has suggested linking the price of gas produced by state-owned firms from
fields given to them on a nomination basis to imported crude oil prices rather
than benchmarking them to gas rates in international markets which helps in
maintaining the rates subject to a floor and ceiling.
● State
producers Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) will
be paid a price linked to imported oil but it will have a minimum or floor
price of $4 per million British thermal units and a cap or ceiling price of
$6.5.
2. Fixed band of pricing:
● A
fixed band of pricing for gas from legacy fields, which makes up for two-thirds
of all-natural gas produced in the country, would ensure a predictable pricing
regime for producers and at the same time moderate prices of CNG and piped cooking
gas which has shot up by 70% since last year on the back of a surge in input
cost.
3. Market determined pricing from January 1, 2027:
● The
producers have marketing and pricing freedom which is constrained by an upper
bound fixed by the government.
● The Committee has suggested continuing with the cap for three years and giving total pricing freedom from January 1, 2026, by removing the cap.
4. Include Natural gas under GST regime:
● The
panel also suggested including natural gas in the one-nation-one-tax regime of
GST by subsuming excise duty charged by the central government and varying
rates of VAT levied by state governments.
● To
address state concern of loss of revenue, the panel was in favor of setting up
a mechanism similar to the compensation cess regime that made good for any
revenue loss that states incurred by way of giving their right to levy VAT and
other taxes on goods and services in first five years of implementation of GST
regime from July 1, 2017.
● The
panel was also in favor of moderation in
rates of excise duty.
5. City gas given priority:
● The
city gas will continue to get top priority in the allocation of APM gas. The
sector will be in the 'no-cut' category, meaning supplies to other consumers
will be cut first in case of a decline in production.