THE PRICE PUZZLE

THE RECENT PRICING AND TRANSMISSION REFORMS MAY LEAD INDIA TO MEET ITS OBJECTIVE OF MORE THAN DOUBLING THE SHARE OF GAS IN ITS ENERGY BASKET BY MAKING THE COMMODITY MORE AFFORDABLE TO CONSUMERS

- MANISH PANT

IF YOU HAVE travelled in a cab in the past 12 months, chances are that at some point, one of the drivers may have tried renegotiating the fare as well as demanded extra money for switching on the air conditioner. And if you have a school-going kid, chances are that you are paying at least 20 per cent more than last year for her school transport. If you are in-charge of the household budget, you’ve most likely complained about rising fruit and vegetable prices and north-bound costs of piped cooking gas. Lastly, if you are an entrepreneur with an interest in fertilisers or power, you would have seen your fuel bills balloon. All this point to the fact that people were greatly peeved due to a nearly 80 per cent spike in natural gas prices. The world’s third-largest hydrocarbon consumer’s relationship with the commodity can be summed up in two words: It’s complicated.

In light of these distress signals, the government’s approval of the Kirit Shantilal Parikh-led panel’s recommendations on gas pricing, as well as the roll-out of a unified tariff for transmission infrastructure announced within days of each other, may have come at just the right time. The rise in prices of compressed natural gas (CNG) and piped natural gas (PNG) in India had not only impacted a large consumer base, but could have also derailed the government’s plans to increase the share of gas in the country’s energy mix to 15 per cent by 2030 (from 6.5 per cent now), in pursuit of its carbon emission goals. But why did the prices rise? They shot up due to slow restoration in supplies of domestically produced gas post-Covid-19, on top of a flawed pricing mechanism and geopolitics.