India has set up a panel to review the pricing formula for locally produced gas to ensure a “fair price to the end consumer”, according to a government order seen by Reuters, a move aimed at lowering inflation and boosting use of the cleaner fuel.
Prime Minister Narendra Modi wants to raise the share of gas in energy mix to 15% by 2030 from 6.2%, helping it progress towards meeting a 2070 net zero carbon-emission goal.
To incentivise gas producers and boost local output, since 2014 India has linked local gas prices to a formula tied to global benchmarks, including Henry Hub, Alberta gas, NBP and Russian gas.
In 2016, the country began fixing the ceiling prices of gas produced from ultra-deep water and challenging fields and allowed marketing freedom to the operators of these fields.
The state-set local gas prices and ceiling rates are at a record high and are expected to rise further due to a surge in global gas prices triggered by the Ukraine-Russia conflict.
The panel has to submit its report by end of this month, according to the order.
The committee, headed by energy expert Kirit Parikh, will include members from the fertiliser ministry, as well as gas producers and buyers.
Apart from ensuring fair prices to end consumers, the panel will also suggest a ‘market oriented, transparent and reliable pricing regime for India’s long term vision for ensuring a gas based economy,” the order said.
A government source said the panel’s recommendations will not be reflected in the next six-month revision of local gas prices from October, as cabinet approval is required for implementation.
The fertiliser and oil minister did not immediately respond to an emailed request for comment.
Higher gas prices tend to boost the earnings of producers like Oil and Natural Gas Corp Ltd, Oil India Ltd and Reliance Industries but also stoke inflation as prices turns costly for households, industries, and the fertiliser, power and transport sectors.
The inflation peaked at 7.79% in April before easing in the last three months, but has remained above the Reserve Bank of India’s mandated target band of 2%-6% for seven consecutive months. Economists expect inflation to remain above the central bank’s upper tolerance band in the coming months.