Govt Revises Gas Pricing Formula. CNG, Piped Cooking Gas To Cost 10% Less

The Union Cupboard on Thursday accredited a revision within the components for pricing of pure fuel and imposed cap or ceiling value to assist minimize CNG and piped cooking fuel costs by as much as 10 per cent.

Pure fuel produced from legacy or outdated fields, referred to as APM fuel, will now be listed to the value of imported crude oil as a substitute of benchmarking it to fuel costs in 4 surplus nations such because the US, Canada and Russia, Union I&B Miniser Anurag Thakur advised reporters after a gathering of the Cupboard.

APM fuel might be priced at 10 per cent of the value of basket of crude oil that India imports (Indian basket of crude oil). The speed such arrived at nonetheless might be capped at USD 6.5 per million British thermal unit. There can even be a ground or base value of USD 4 per mmBtu.

The ceiling value is decrease than the present charge of USD 8.57 per mmBtu and would translate into a discount in costs of piped cooking fuel in addition to CNG bought to vehicles, he stated.

Piped cooking fuel costs might be minimize by as much as 10 per cent throughout cities whereas CNG will see somewhat decrease discount, he stated.

Charges of piped cooking fuel, referred to as PNG, and CNG have jumped 80 per cent in a single 12 months to August 2022. This follows a spurt in worldwide vitality costs.

Following the choice, the CNG value in Delhi might be minimize from Rs 79.56 per kg to Rs 73.59 and that of PNG from Rs 53.59 per thousand cubic meters to Rs 47.59. In Mumbai, CNG will value Rs 79 per kg as a substitute of Rs 87 and PNG will value Rs 49 per scm as a substitute of Rs 54.

The Indian basket of crude oil is at present priced at USD 85 per barrel and 10 per cent of that interprets right into a value of USD 8.5 however the cap would imply the APM fuel produces, ONGC and Oil India Ltd would get solely USD 6.5 per mmBtu.

These caps and ground costs might be for 2 years and charges will improve by USD 0.25 per mmBtu per 12 months thereafter, the minister stated.

The adjustments within the fuel pricing components are primarily based on the suggestions of a committee below Kirit Parikh.

Whereas the committee’s suggestion for ground and ceiling in addition to indexation has been accepted, the one on annual increment and full deregulation has been modified.

The panel had steered a 50 cents per mmBtu improve within the USD 6.50 ceiling yearly to slowly transfer towards the advertising and marketing and pricing freedom for APM fields.

Requested concerning the deregulation, Oil Secretary Pankaj Jain stated the selections taken by the cupboard have been knowledgeable.

Additionally, charges might be mounted each month as a substitute of the present follow of fixing them bi-annually.

At the moment, the federal government bi-annually fixes costs of regionally produced pure fuel — which is transformed into CNG to be used in vehicles, piped to family kitchens for cooking and used to generate electrical energy and make fertilisers.

Two completely different formulation govern charges paid for fuel produced from legacy or outdated fields of nationwide oil firms like Oil and Pure Gasoline Company (ONGC) and Oil India Ltd (OIL), and that for newer fields mendacity in tough to faucet areas reminiscent of deepsea.

The worldwide spurt in vitality costs publish Russia’s invasion of Ukraine has led to charges of regionally produced fuel climbing to report ranges – USD 8.57 per million British thermal unit for fuel from legacy or outdated fields and USD 12.46 per mmBtu for fuel from tough fields in six month interval ending March 31.

On the April 1 revision, the APM fuel value was saved on maintain pending Cupboard approval for the change within the pricing components. Had the outdated components continued, costs of fuel from legacy fields would have climbed to USD 10.7 per mmBtu.

The value of fuel from tough fields was minimize to USD 12.11 per mmBtu.

The federal government had final 12 months constituted a committee below Kirit Parikh to take a look at a revision in fuel costs that balances each native shopper and producer curiosity, whereas on the similar time advancing the nation’s reason behind changing into a gas-based economic system.

Whereas leaving the components for tough fields unchanged, the panel steered the value band for present manufacturing from legacy or outdated fields, which make up for two-thirds of all fuel produced within the nation and is at present below the administered value mechanism, or APM, till a full deregulation of costs is carried out in 2027.

The panel steered a 50 cents per mmBtu improve within the USD 6.50 ceiling yearly to slowly transfer towards the advertising and marketing and pricing freedom for APM fields.

Thakur stated the ceiling value covers for the price of manufacturing of producers whereas defending shoppers notably CNG customers, kitchens utilizing piped cooking fuel and fertilizer vegetation who had grappled with hovering enter value.

APM fuel makes up for many of CNG and kitchen fuel provides.

India aspires to turn into a gas-based economic system with the share of pure fuel in its major vitality combine focused to rise to fifteen per cent by 2030 from the present degree of round 6.3 per cent.

APM fuel fields had been allotted to ONGC and OIL earlier than 1999. Manufacturing from these fields don’t entice profit-sharing with the federal government, and their pricing components is benchmarked to fuel costs at worldwide fuel hubs in surplus nations each six months primarily based on the weighted common value. Costs had been final revised on October 1 and are actually due for revision on April 1.

To incentivize extra manufacturing from a brand new nicely or nicely intervention within the nomination blocks, the Kirit Parikh committee really helpful a premium of 20 per cent over and above the APM costs for ONGC and OIL until full freedom. This has been accredited by the Cupboard, he stated.

As a lot as 34 per cent of APM fuel is allotted to the ability sector in 2021-22, 17 per cent to the fertilizer business, which impacts meals costs, and 22 per cent to town fuel sector.

The committee additionally really helpful that fuel must be introduced below the Items and Providers Tax, or GST, regime. Having a standard taxation reminiscent of GST for fuel in lieu of state degree VATs, which range from 3 per cent to as excessive as 24 per cent, will assist develop the market.

(This report has been printed as a part of the auto-generated syndicate wire feed. No modifying has been finished within the headline or the physique by ABP Stay.)

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