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Gas pricing freedom

GS Paper 3

Syllabus: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

 

Source: Indian Express, The Hindu

Direction / Tips: Theme ‘ ENERGY’ – Natural gas, petroleum etc is very important both for Prelims & Mains.

 

Context: Oil ministry committee under economist Kirit Parikh has recommended liberalizing the pricing of gas produced from legacy fields of state-run operators, recommending a floor and ceiling price, and complete pricing freedom starting January 1, 2027.

Gas from legacy fields is described as ‘APM (administered pricing mechanism) gas’ and is allotted by the government.

 

Need for liberalizing the gas pricing :

  • To ensure investment, as costs of finding and producing natural gas from deposits lying several hundred meters below the seabed are market-driven.
  • Shifting towards a gas-based economy.
  • Helps in improving the environment – dependence on coal and oil needs to be reduced.
  • Will enhance the Ease of Doing Business.
  • A price band will ensure a predictable pricing regime for producers and protect consumers by moderating CNG and PNG price spikes.

Suggestions given by the panel:

  • Linking the price of gas produced by the state-owned firms with the imported crude oil prices rather than benchmarking them to gas rates in international markets.
  • Including natural gas in the one-nation-one-tax regime of GST by subsuming excise duty charged by the central government and varying rates of VAT levied by state governments.
  • Price escalation for the old fields, with an increase of $0.5 per metric million British thermal units (mmBtu) annually with no change in pricing for the first two years or a $0.25 per mmBtu escalation for five years.

 

About natural gas:

Natural gas, also called methane gas or natural methane gas, is a colourless highly flammable gaseous hydrocarbon consisting primarily of methane and ethane. It is a type of petroleum that commonly occurs in association with crude oil. It can be used as a domestic and industrial fuel.

petrolem_natural_gas 

 

Insta Links:

Natural Gas

 

Mains Link:

Q. Will natural gas be the game-changer in India’s energy future? Discuss. (150 Words)

  

Prelims Link:

In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a combined weight of 37.90%. Which of the following is among those Eight Core Industries? (UPSC 2012)

    1. Cement
    2. Fertilizers
    3. Natural Gas
    4. Refinery products
    5. Textiles

Select the correct answer using the codes given below

(a) 1 and 5 only

(b) 2, 3 and 4 only

(c) 1, 2, 3 and 4 only

(d) 1, 2, 3, 4 and 5

Solution: C

The index of eight core industries measures combined and individual performance of production in selected industries namely coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.