Price Restriction on locally produced natural gas removed-To Boost Investment
GoI has been reforming the oil and gas sector lately. Steps are being taken to free up pricing of oil and gas sector to scale up oil and gas production and to increase investment in the sector. To achieve this, GoI on November 11, 2019 removed price restriction on locally produced oil and natural gas.
Current Pricing System
The current pricing system of oil and gas is based on the New Exploration Licensing Policy. According to the policy, the producers cannot charge gas from deep sea below government-prescribed ceiling. GoI has fixed this ceiling at 8.43 USD per mmBTU. The ceiling is to be removed under the new regulation.
Gas producers were critical about this low pricing that affected the investment adversely. Though, the prices seem increasing at initial period, it will get reduced in long term. As more investors compete in the market, the prices will gradually fall after reaching a saturation peak point.
The move was suggested by the Kelkar Panel. The Panel suggested to increase the ceiling gradually and remove it completely to increase the investment.
Kelkar Panel was set up by the Petroleum Ministry to boost domestic production of oil and gas and to help India achieve energy security. It was set up in 2013 under the Finance secretary Vijay Kelkar. The Kelkar Committee submitted its report in 2013