The Union cabinet is expected to take up Kirit Parikh panel's recommendations of a ceiling price of $6.5 and a floor price of $4 per mBtu (million British thermal unit) for domestically producted natural gas prices on Thursday.
The panel has suggested a new pricing formula that will be linked with 10 per cent of the crude price, subject to the floor and ceiling.
It had also suggested free pricing starting January 2027 for gas produced from these legacy fields and from January 2026 for the difficult fields.
The panel recommended that the price of gas produced by state-owned firms be linked to imported crude oil prices instead of benchmarking them to gas rates in international hubs — Henry Hub (US and Mexico), Alberta (Canada), National Balancing Point (European Union) and the Russian natural gas.
Legacy fields account for two-thirds of all natural gas produced domestically.
According to the committee’s recommendations, the ceiling rate for the gas from legacy or old fields, called APM gas, will be increased by $0.50 per mBtu annually. From January 1, 2027, the panel has suggested market-determined pricing of APM gas.
Prashant Vasisht, vice-president and co-group head — corporate ratings, Icra,said: “The recommendations of the committee are pragmatic and balanced taking in view the interests of both consumers and producers of gas.
"From the consumer’s perspective, lower gas prices are a positive. The reduction in price should result in a cut in CNG and PNG (domestic) prices by the CGD (city gas distribution) players. Lower domestic gas prices would also reduce GoI’s subsidy burden for the fertiliser sector.”
The government had left the price of APM gas, used to make CNG and fertilisers, unchanged pending a cabinet decision on capping rates, according to an official order.
While the price of natural gas from legacy or old fields was left unchanged at $8.57 per mBtu, the rate for the fuel from newer but difficult fields such as one operated by Reliance and its partner BP in the KG basin was cut marginally to $12.12 per mBtu.
