Natural gas prices hiked by 40%; CNG, PNG to cost more
New Delhi, September 30
Prices of natural gas, which is used to generate electricity, make fertiliser and is converted into CNG to run automobiles, were on Friday hiked by a steep 40% to record levels, in step with global firming up of energy rates.
Record levels
- The rate paid for gas produced from old fields was hiked to $8.57 per million British thermal units from the current $6.1
- The price of gas from difficult and newer fields like the ones in Reliance Industries and its partner bp plc operated in KG basin was hiked to $12.6 per mmBtu from $9.92
- These are the highest rates for administered/regulated fields and free-market areas (such as the KG basin)
The rate paid for gas produced from old fields, which make up for about two-thirds of all gas produced in the country, was hiked to $8.57 per million British thermal units from the current $6.1, according to an order from the oil ministry’s Petroleum Planning and Analysis Cell (PPAC).
The price of gas from difficult and newer fields like the ones in Reliance Industries Ltd and its partner bp plc operated deepsea D6 block in KG basin, was hiked to $12.6 per mmBtu from $9.92, the order said.
These are the highest rates for administered/regulated fields (like ONGC’s Bassein field off the Mumbai coast) and free-market areas (such as the KG basin). Also, this will be the third increase in rates since April 2019 and comes on the back of firming benchmark international prices.
Gas is an input for making fertiliser and generating electricity. It is also converted into CNG and piped to household kitchens for cooking purposes. A steep increase in prices is likely to reflect in higher rates for CNG and piped natural gas (PNG), which has in the last one year risen by over 70%.
The government sets the price of gas every six months — on April 1 and October 1 — 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.
So, the price for October 1 to March 31 is based on the average price from July 2021 to June 2022. This is the period when global rates shot through the roof.
As higher gas prices can potentially further fuel inflation, which has been stubbornly above the RBI’s comfort zone for the past eight months, the government has set up a committee to review the pricing formula.
The committee, under former planning commission member Kirit S Parikh, has been asked to suggest a “fair price to the end-consumer” by September-end but the report is delayed. The government had in 2014 used prices in gas surplus countries to arrive at a formula for locally produced gas.
