Revised Domestic Gas Pricing Guidelines Approved by Union Cabinet

Revised Domestic Gas Pricing Guidelines are expected to cause a substantial reduction in prices for PNG in households & CNG used for transportation. Domestic Gas Pricing Guidelines are discussed below

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Revised Domestic Gas Pricing Guidelines: The revised Domestic Gas Pricing Guidelines are the updated guidelines for determining the prices of domestic gas in India. Revised Domestic Gas Pricing Guidelines are important for UPSC Prelims 2023 and UPSC Mains Exam (GS Paper 2- Various government policies to promote sustainable energy infrastructure in India).

Revised Domestic Gas Pricing Guidelines in News

Recently, Revised guidelines for pricing of domestically produced natural gas from specific nomination fields have been approved by the Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi.

Revised Domestic Gas Pricing Guidelines

The approved revised domestic natural gas pricing guidelines are applicable to the nomination fields of ONGC/OIL, NELP blocks, and pre-NELP blocks, where the prices are subject to the Government’s approval as per the Production Sharing Contract (PSC).

A monthly notification of the pricing for the specified natural gas will be set at 10% of the Indian Crude Basket’s monthly average.
For ONGC & OIL’s nomination block-produced gas, the Administered Price Mechanism (APM) price will have a minimum and maximum limit.
Newly drilled or intervened wells in their nomination fields will be permitted a 20% premium over the APM price for their produced gas.

Domestic Gas Pricing Guidelines, 2014

At present, the pricing of domestic gas is determined according to the Domestic Gas Pricing Guidelines of 2014, which received Government approval in the same year.

These guidelines dictate the declaration of domestic gas prices for a period of six months, based on the volume-weighted prices prevailing at four gas trading hubs, namely Henry Hub, Albena, National Balancing Point (UK), and Russia.
The prices are based on the preceding 12 months with a time lag of one quarter.

Need for Revised Domestic Gas Pricing Guidelines

The revision and reform of the earlier gas pricing guidelines was deemed necessary due to their high volatility and significant time lag based on four gas hubs.

The new guidelines address this by linking prices to crude, which is now a standard practice in most industry contracts and more relevant to our consumption basket, with deeper liquidity in global trading markets on a real-time basis.
Under the revised guidelines, the previous month’s Indian Crude basket price data will determine the APM gas price.

Revised Domestic Gas Pricing Guidelines Significance

The revised guidelines aim to establish a consistent pricing system for domestic gas consumers while also offering incentives to producers to boost production and safeguard against market volatility.

To increase the share of natural gas in India’s primary energy mix from the current 6.5% to 15% by 2030, the government has set a target.
These reforms are intended to encourage the use of natural gas, resulting in a reduction in emissions and progress toward the goal of achieving net zero.
The revisions are expected to cause a substantial reduction in prices for Piped Natural Gas (PNG) in households and Compressed Natural Gas (CNG) used for transportation.
These price reductions will also reduce the burden of the fertilizer subsidy and provide assistance to the domestic power sector.
The growth of a gas-based economy promoted by the revised pricing guidelines will also result in a lower carbon footprint.

Gas Price Review Panel Submitted its Report: Key Recommendations?

Gas Price Review Panel Submitted its Report: Key Recommendations?

FAQs

What are the revised Domestic Gas Pricing Guidelines?

The revised Domestic Gas Pricing Guidelines are the updated guidelines for determining the prices of domestic gas in India.

What are the changes in the revised guidelines?

The revised guidelines make prices linked to crude, which is a more relevant practice in the industry contracts, and has deeper liquidity in global trading markets, on a real-time basis. The data of Indian Crude basket price from the previous month will form the basis for APM gas price determination. Additionally, 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.

What was the need for revising the guidelines?

The earlier guidelines were based on the volume-weighted prices prevailing at four gas trading hubs with a time lag of a quarter, which caused significant time lag and high volatility. The revised guidelines aim to address these issues and provide a more stable and relevant pricing regime.

How will the revised guidelines impact the gas-based economy in India?

The revised guidelines are expected to promote the growth of the gas-based economy in India and reduce the carbon footprint. The reduced prices of Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for transport will also lower the fertilizer subsidy burden and help the domestic power sector.