India to cut gas prices from April 1 as Kirit Parikh panel recommends capped rates: Report

India shall reduce gas prices as it looks to adopt a Kirit Parikh panel report this week, A Reuters report said on March 28, adding that the gas committee has recommended capping the price for most local gas at $6.50 per million British thermal units (mmBtu) in April.

According to the report, Kirit Parikh committee has suggested that the monthly price of gas produced from old blocks be fixed at 10 percent of the monthly average of the Indian crude basket, with a cap of $6.5/mmBtu and a floor price of $4/mmBtu.

Last week, Pawan Kumar, Director-Commercial at Indraprastha Gas Limited (IGL) also told CNBC-TV18, "If Kirit Parikh Panel recommendations are implemented, there will be some reduction in the input gas cost, there will be a reduction of $1.5/mmBtu."

Ashu Shinghal, Managing Director of Mahanagar Gas Limited (MGL) too is of a similar view.

Pinakin Parekh, ED-Metals and Mining, Oil and Gas, Cement at JPMorgan India believes that gas consumers will see significant cost reductions in coming months.

“Gas prices seasonally are lower at this point of time. If you are a gas consumer for the next few months, you would see costs reduce materially. India’s gas demand is price sensitive and a lot of demand consuming sectors were negatively impacted last year. We saw imports fall very sharply, this will reverse over the coming months. So I think the gas value chain should benefit from lower spot LNG prices at least for the next few months,” he explained.

The Reuters report added that the price will apply to industrial buyers and companies in the fertiliser and city gas distribution sectors and will be fixed on a monthly basis. The current price of gas from old blocks is set at $8.57 and is valid from October to end-March.

The average price of the Indian crude basket from 26th of the previous month to 25th of the current month would be used to determine the price of gas for the next month, a source cited by the news agency said.

Given that the average price of 10 percent of India's crude basket from Feb. 26 to March 25 is over $7/mmBtu, the price in April would be at the cap of $6.5/mmBtu, the report adds.

The Cabinet is scheduled to meet on Wednesday as the final date to adopt the Kirit Parikh Panel report is April 1. It must be noted that APM gas prices are revised every 6 months, first period is from April 1 to September 30.

The move to overhaul gas pricing is also part of Prime Minister Narendra Modi's aim to raise the share of gas in India's energy mix to 15 percent by 2030 from 6.2 percent, to help India meet a 2070 net zero carbon-emission goal.

Meanwhile, the Reuters report points out that over 80 percent of India's yearly gas output of 91 billion cubic metres comes from old fields owned by the government-run Oil and Natural Gas Corp. and Oil India Ltd. Oman and Dubai crudes make up on average 75.6 percent of India's crude basket, with 24.5 percent coming from dated Brent.