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Gas pricing formula revised by govt, resulting in 10% cheaper CNG and piped cooking gas

On Thursday, the Union Cabinet approved the revision of the formula for natural gas pricing, which will result in up to a 10% reduction in the prices of compressed natural gas (CNG) and piped cooking gas. Anurag Thakur, the Union I&B Minister, told reporters that natural gas produced from old fields, known as APM gas, will now be indexed to the price of imported crude oil. The price of APM gas will be 10% of the price of the basket of crude oil that India imports, but the price will be capped at USD 6.5 per million British thermal unit, and there will be a floor price of USD 4 per mmBtu.

 

Thakur also stated that the Kirit Parikh committee’s recommendation to offer a 20% premium above APM prices for Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) for new wells or well interventions in nomination blocks until complete freedom will be implemented. In the 2021-22 fiscal year, the power sector will receive 34% of APM gas, the fertilizer industry will receive 17%, and the city gas sector will receive 22%.

 

Furthermore, the committee recommended that gas be included in the Goods and Services Tax (GST) regime to develop the market. According to Thakur, ‘having a common taxation such as GST for gas in lieu of state level VATs, which vary from 3 per cent to as high as 24 per cent, will help develop the market.’ The pricing formula for non-APM gas, which does not attract profit-sharing with the government, is benchmarked to gas prices at international gas hubs in surplus nations every six months based on the weighted average price. Prices were last revised on October 1 and are now due for revision on April 1.

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