crude price: Natural gas pricing: Consumers to get gas at competitive rates with respect to alternative fuels: Kirit Parikh
Firstly congratulations on the recommendations being accepted and the mechanism clearly provides a floor and ceiling of $4-$6.5 on crude. But I understand that it must be a complex formula to begin with to calculate the prices. But as a layman can one say whether crude goes to $60 or $100 and gas prices would be within the $6.5 on the top end and $4.00 on the lower end range?
There are couple of concerns people have that if you are linking price to crude oil price and suppose the crude oil price becomes very large, then the domestic gas price would be higher. But at the same time, we are providing an upper ceiling. And the ceiling is such that even when the crude price or the gas price in the international market goes dramatically down, it would still not be below that ceiling price that we have set. For example, let me elaborate suppose the gas price in the US port is $2.5 a million BTU then that gas has to be compressed, liquefied first, then put in a tanker and the tanker is brought to ocean freight across and then it will be re-gasified again.
When you do all these that $2.5 gas will become something like $6.5 in India. So therefore even when the gas price come down, the domestic gas price cannot be above $6.5 and that is why we have provided a ceiling for that. And when the price goes down significantly suppose the crude oil price becomes $60 a barrel and gas price then becomes $6, it will still be higher than the $4 that we have provided and lower than the $6.5.
So I think we have accounted for these very large fluctuations on international oil prices and international gas prices and tried to stay within that bound so that the consumers get their gas at competitive rates with respect to their alternative fuels which are possible.
In your understanding what would be the impact of the new pricing for final consumers as of today? Let us say if they were paying 100 will they now pay 90 or 110?
See, one has to recognize that currently large amount of LPG is imported. So if the LPG price goes up then the consumers have to pay higher price. Now what we have done is that the consumer price would remain lower than that of LPG price. CNG price would be less than that. So for example if you are cooking at LPG cylinders and if you change over to pipe natural gas, you will find that your monthly bill is lower than what it was otherwise earlier with LPG.
And the same way would be applied to the CNG users’ vehicles. For example, even if you are driving a diesel vehicle with a Bharat standard six emission controls, BS6 emission controls, your emissions of CO2 and particulates both would be higher than that of a vehicle which is using compressed natural gas. So it is a desirable use because it will reduce urban air pollution or indoor air pollution in kitchens. And that is why I think in both the cases the price range is such that it will always be less than the competing fuels that are available.
As per the regulations, what would be the next timeline for the next revision?
Well my understanding is that it should be implemented fairly shortly. I did not see in the press release any specific timeline but there is no reason to delay it once the cabinet has approved it. Maybe from the first of next month it will start. But this is my guess only and when it will be implemented depends on the government and the ministry.
