Kirit Parekh panel suggest complete deregulation of Gas prices from 1 January 2026

Tags: committee Economy/Finance

The Kirit Parekh panel set up by the government of India to review the gas pricing formula in India has submitted its report to the Government of India on 30 November.  It has made a host of recommendations to deregulate gas prices in India by January 1, 2026. Deregulation here means the price of the gasses shall be decided by the market not by the government.

In September, the government constituted the committee, led by energy expert and former Planning Commission (since renamed NITI Aayog) member Kirit Parikh, to review the gas pricing formula for gas produced in the country with the aim to ensure a fair price.

Background to the Issue 

India is a major importer of gas in the world but there are certain gas fields in India which produce Natural Gases.

There are broadly two types of Gas field in India.

One is called a legacy gas field. They are those gas fields that were allotted to Government owned ONGC and Oil India Limited (OIL).  The price of the gasses produced from these fields are decided by the government and they are provided to consumers at a highly subsidized price. Also ONGC and OIL neither give any royalty to the government nor share their profit with the government.

Such fields account for about 80 per cent of annual gas output of India.

Other Gas fields

The other gas fields are owned by private companies like Reliance, Vedanta. They have to give royalty to the government. In these gas fields there is pricing freedom but the maximum price is fixed by the government.

Recommendation of the Parekh Committee

• For the Legacy gas field it has recommended  a minimum price of USD 4 per Metric Million British Thermal Unit (mmBTU)  and the  maximum price at USD 6.5/mmBTU.
• It has recommended increasing the upper limit by USD 0.5/mmBTU   every year. The proposal is to implement this from 1 January 2027.
• For the other gas field it has recommended that the upper price limit shall be removed from 1 January 2026. This will give them full freedom to set prices and make marketing strategies.
• The committee has also recommended bringing natural gas under the ambit of Goods and Services Tax (GST) to bring transparency in the pricing of gas.

Gas price mechanism in India 

The government sets the price of gas every six months, on April 1 and October 1 of each year, based on rates prevalent in gas-surplus nations such as the US, Canada and Russia in one year with a lag of one quarter.