The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved the revised domestic natural gas pricing guidelines for gas produced from nomination fields of ONGC/OIL, New Exploration Licensing Policy (NELP) blocks, and pre-NELP blocks, where Production Sharing Contract (PSC) provides for Government's approval of prices.
As per the guidelines, the price of such natural gas shall be 10% of the monthly average of Indian Crude Basket and shall be notified on a monthly basis. For the gas produced by ONGC & OIL from their nomination blocks, the Administered Price Mechanism (APM) price shall be subject to a floor and a ceiling. Gas produced from new wells or well interventions in the nomination fields of ONGC & OIL would be allowed a premium of 20% over the APM price.
The Government has targeted to increase the share of natural gas in the primary energy mix in India from the current 6.5% to 15% by 2030. The new guidelines are intended to ensure a stable pricing regime for domestic gas consumers while at the same time providing adequate protection to producers from adverse market fluctuation with incentives for enhancing production.
A statement issued by the Government read, 'The reforms will lead to a significant decrease in prices of Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for transport.'
The domestic gas prices are currently determined per the new Domestic Gas Pricing Guidelines, 2014. The earlier guidelines based on four gas hubs had a significant time lag and very high volatility, so the need for this rationalisation and reform was felt. The revised guidelines make prices linked to crude, which is a practice now followed in most industry contracts, more relevant to the country's consumption basket and has deeper liquidity in global trading markets on a real-time basis.
Reacting to the announcement, Vinod Aggarwal, President, SIAM, and MD & CEO, CECV, said, “Realignment of the Gas Pricing mechanism by insulating the Indian consumers from the spikes in Global prices will soften prices in India and will provide much-needed relief to the transportation sector. This measure will also help in re-igniting interest in CNG vehicles in India and would go a long way in promoting a clean alternative fuel in various parts of the country. Incentivising greater production of natural gas will result in a reduction in import dependence of conventional fuels, thereby enabling expansion of CNG infrastructure across the country and facilitating wider availability of CNG for vehicles.”
Photo courtesy: ONGC.
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