New Delhi [India], April 7 : City gas distributors could reduce prices of compressed natural gas (CNG), used by vehicles, and piped natural gas (PNG), used by homes, by 9-11 per cent, with the government accepting the key recommendations of the Kirit Parikh Committee, according to a Crisil Ratings report.
It said that prices would have likely risen if the previous pricing regime had continued.
"This revised gas pricing norms would lend greater stability to gas prices for city gas distributors and sustained competitiveness with alternative fuels, thus driving demand and supporting massive capex plans," the report said.
The union cabinet on Thursday approved the revised domestic natural gas pricing guidelines for gas produced from nominated fields of Oil and Natural Gas Corporation (ONGC), Oil India Limited(OIL), New Exploration Licensing Policy (NELP) blocks and pre-NELP blocks, where production sharing contract provides for government's approval of prices.
The price of such natural gas shall be 10 per cent of the monthly average of Indian Crude Basket and shall be notified on a monthly basis.
Now, basis the last month's average crude price at USD 78 per barrel, the ceiling price of USD 6.5/mmBtu (Metric Million British Thermal Unit) for gas will kick in, providing relief to city gas distributors, it said.
"With APM (Administered Price Mechsm) prices now benchmarked to crude
oil, it would ensure sustained competitiveness of CNG and residential PNG with alternative fuels such as petrol, diesel, and liquefied natural gas (LNG)," said Joanne Gonsalves, Associate Director, CRISIL Ratings.
"This (change in pricing mechsm) can accelerate and sustain adoption of city gas and support distributors that have planned capex of Rs 90,000 crore over the next 4-5 fiscal," Gonsalves added.
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