• Notification Date: 02-12-2022
  • Notification No: N/A

Panel proposes GST for natural gas; recommends compensation to states for 5 years

On Wednesday, a committee headed by Kirit Parekh submitted its recommendation to the government. The committee has recommended a new gas pricing formula. Mr. Parekh said that there are 12-13 types of gas fields in India and each has a different gas pricing formula. The Chairman of the Sustainable Gas Pricing Committee gives detailed insights on gas pricing and has simplified the structure. 

The primary problem in gas pricing was with respect to APM (Administered Price Mechanism) gas where fields were allocated to ONGC and OIL without any royalty or any profit sharing several years back. He added that the government owns a 57% stake in these gas fields. Parekh said that the gas from these fields was given to consumers at a very subsidized rate. The committee has suggested a floor price of USD 4/mmBtu while the maximum price at USD 6.5/mmBtu. The highest limit shall be increased by USD 0.5 percent every year. The Committee has proposed to implement this idea from 1 January 2027.   

There is an upper bound in other gas fields, where there is a freedom of pricing; and the committee has suggested that the upper bound should be removed from 1 January 2026. This offers the gas fields with full freedom to set prices and make marketing strategies. 

The Committee has suggested bringing natural gas under the ambit of Goods and Services Tax (GST) as all other commodities are also included under it. This will help bring transparency to the tax structure. Parekh suggested making a consensus with states on this matter.