<h1 class="ql-align-center"><strong style="color: rgb(230, 0, 0);">Kirit Parikh Committee&nbsp;</strong></h1><p class="ql-align-center"><br></p><h3><strong>Context&nbsp;</strong></h3><ul><li class="ql-indent-1">The prices of compressed natural gas (CNG) used by vehicles and piped natural gas (PNG) used by homes could be reduced by 9­11% with the government accepting the key recommendations of the Kirit Parikh Committee, Crisil Ratings wrote in a note.&nbsp;</li><li class="ql-indent-1">Had the previous pricing regime continued, prices would have risen further.</li></ul><h3><strong>Past Formula&nbsp;</strong></h3><ul><li class="ql-indent-1">Till now, the price of gas produced from fields covered under the Administered Price Mechanism (APM) regime — which ac­counts for 70% of domestic gas production — <strong>was determined semi-annually based on a formula that benchmarks it to average international prices at four gas trading hubs.</strong></li></ul><h3><strong>About the committee&nbsp;</strong></h3><ul><li class="ql-indent-1"><strong>The committee was constituted last year (2022) to review the existing pricing formula for domestically produced natural gas in India.</strong></li></ul><h3><strong>Major Recommendation&nbsp;</strong></h3><ul><li class="ql-indent-1"><strong>Fixed Ceiling price (till 2027)</strong></li><li class="ql-indent-2"><strong>Implement a fixed pricing band for APM (Administrative Price Mechanism) gas from old fields</strong></li><li class="ql-indent-2"><strong>The old fields account for two-thirds of natural gas produced in India</strong></li><li class="ql-indent-2"><strong>Currently, government controls the price of Gas produced from old fields</strong></li><li class="ql-indent-1">Move to a purely market-determined natural gas pricing system by 2027</li><li class="ql-indent-1">Link the domestic gas price to 10% of the cost of imported crude oil</li><li class="ql-indent-1">As per a key recommendation of the committee accepted by the Government, the<strong> APM formula is now revised and determined as a 10% slope to crude </strong>oil prices, but with a floor and ceiling price of $4/mmBtu and $6.5/ mmBtu, respectively.</li><li class="ql-indent-1"><strong>No-cut category (uninterrupted supply)</strong></li><li class="ql-indent-2">Some of the sectors have been kept in the ‘no-cut’ category (meaning that supplies will remain uninterrupted in this category even in case of a decline in production)</li><li class="ql-indent-2">E.g., The city gas and fertilizer sector will continue to get top priority in the allocation of APM gas.</li><li class="ql-indent-1"><strong>Ceiling price&nbsp;</strong></li><li class="ql-indent-2">There is a need for a fixed pricing band for gas from old fields which is called APM (Administrative Price Mechanism) gas.</li><li class="ql-indent-2">These fields account for two-third of natural gas produced in the country.</li></ul><h3><strong>About Administrative Price Mechanism (APM):</strong></h3><ul><li class="ql-indent-1">To prevent hoarding, maintain the prices of essential goods (such as Gas) at reasonable levels, and ensure their easy availability, the government fixes the prices of certain commodities.&nbsp;</li><li class="ql-indent-1">This is known as the <strong>administered price mechanism.</strong></li></ul><p class="ql-align-center"><br></p><h1 class="ql-align-center"><strong>PRELIMS NOTES:</strong><a href="https://www.sunyaias.com/subscription-details/prelims-2023-sunya-notes-current-affairs" rel="noopener noreferrer" target="_blank" style="color: rgb(0, 102, 204);"><strong>CLICK HERE</strong></a></h1>