Gas Pricing in India

imported gas constitutes 1/3rd of our consumption

gas doesnt have a single global market price; a range of prices exist across the
world.
gas markets are segmented due to absence of infra for transportation
in the absence of global market price how should india's domestic price be fixed
?
should the remaining 2/3rd priced at import parity ,i.e. global prices?
we know prices must be determined by dd and supply ideally.
govt now ready to implement Rangarajan committee recco which is based on convula
ted weighted average price of 3 gas markets-the henry hub, the european market a
nd the asia pacific market (dominated by china, taiwan,japan an s.korea all gas
deficient and hugely dependent on imported LNG: their desperation has pushed the
prices steeply)
FLAWS:
1. in absence of global market price==> considering global dd and supply is irr
elevant for determinig indian price
2. the supply shortage in gas prodn is having a negative impact on those industr
ies that came up on the promise of plenty of gas and are hugrly dependent on hug
ely expensive LNG to keep their plants in operation.
3. city gas districution(CGD) that also came up on the promise are doing the sam
e
4. the shortage is attributed to the escalation in prodn costs neccessitated by
geological challenges (under verification by CAG)
5. prodn sharing regimes that india has : the operator assumes all project risks
. by claiming revision in prices ,RIL has shifted the risk to govt==>violation o
f market ethics, norms
6. govt shud penalise the operator for causing extensive loss to the stranded ga
s consumers.
effects of price hike in india:
1. food security:
gas is the main feedback that goes into fertilisers. 35% of gas consumed in the
country is used by the fertiliser industry which is heavily subsidised by the g
ovt. when gas price will increase==> the subsidy will increase==> money transfer
red from exchequer to pvt gas producer via fertiliser subsidy or drastic drop in
food grains output
2. Power sector:
another major consumer
its finances are in pre carious state due to huge commercial and technical losse
s referred as theft and dacoity losses(D&T)
3. consumer segment
CNG for transport and piped cooking (LNG) .CNG prices are already at par with di
esel prices driving CNg vehicles out of place
only public transport in delhi(mandated by SC) n few other cities run on CNG .
further hike ==> jeopardise expansion og clean transport
..
PANACEA:
price shud be decided by domestic market
to encourage the use of clean fuel any pricing formula should take into account

the ability of a reasonably balanced , unsubsidised domestic market to absorb th

e price.