Kirit Parikh Committee on Gas Pricing

December 1, 2022

The Kirit Parikh panel recently submitted a report on gas pricing, recommending complete pricing freedom from January 1, 2026.

What are the key recommendations of the panel?

The committee recommended that India should have completely free and market-determined pricing of natural gas extracted from legacy fields, which account for over 70 per cent of the total natural gas produced in India.
The panel recommended linking the price of gas produced from legacy fields to imported crude oil prices rather than benchmarking them to gas rates in global markets. The arrived rates will be subject to a floor and ceiling.
The panel recommended price band of 4 to 6.50 USD per unit for gas from old legacy field. This means that the state producers ONGC and Oil India Limited will be paid a price linked to imported oil but will have a minimum or floor price of 4 USD per million British thermal unit (mmBtu) and a ceiling price of 6.5 USD per mmBtu.
A fixed band of pricing will create predictable pricing for producers and moderate pricing of CNG and piped cooking gas.
The panel also recommended increasing the ceiling rate for the gas from legacy fields by 0.5 per mmBTU.
It recommended market-determined pricing for gas produced from legacy fields by January 1, 2027.
It did not recommend any changes in the existing pricing formula for fields in difficult geology like KG-D6 of Reliance Industries.
Currently, fields in deep sea, high temperature, high-pressure zones are governed by a different formula that includes an element of imported LNG cost. However, they are also subject to a price ceiling of 12.46 USD. The panel recommended providing such fields with complete pricing freedom from January 1, 2026 and removing the cap.
The panel recommended including natural gas in the GST regime by subsuming excise duty charged by the Centre and the VAT levied by the states.
To address states’ concerns of revenue loss, the panel recommended setting up a mechanism similar to the 5-year compensation cess regime that buffered the loss incurred by the states while giving up their right to levy VAT and other taxes on goods and services.
The panel also recommended moderation in excise duty rate

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