The Union Cabinet on Thursday approved a revision in the formula for pricing of natural gas and imposed cap or ceiling price to help cut compressed natural gas and piped cooking gas prices by up to 10%.
Following this the government on Friday announced a natural gas price of USD 7.92 per unit for the remainder of April according to the approved new pricing formula, but rates for consumers have been capped at USD 6.5 per unit.
According to an order of the Oil Ministry’s Petroleum Planning and Analysis Cell, the price of natural gas for April 8 to April 30 period comes to USD 7.92 per million British thermal unit going by the new indexation of pricing it at 10% of imported cost of crude oil.
The capped rates which are about a quarter less than the current prices, will lead to CNG and piped cooking gas prices being cut by up to 10%.
Rates of PNG and CNG have jumped 80% in one year to August 2022. This follows a spurt in international energy prices.
This formula replaces the old one where the rates were fixed using four international gas benchmarks. The price of gas according to this formula was USD 8.57 per mmBtu for six months ended March 31.
The prices will now be revised every month, going forward, instead of bi-annual revision.
The government will monitor prices of CNG and PNG for household kitchens to ensure that the reduction in input gas price is passed on to the consumers.
CNG Prices in Delhi, Mumbai
Following the decision, the CNG price in Delhi will be cut from Rs 79.56 per kg to Rs 73.59 and that of PNG from Rs 53.59 per thousand cubic meters to Rs 47.59. In Mumbai, CNG will cost Rs 79 per kg instead of Rs 87 and PNG will cost Rs 49 per scm instead of Rs 54.
Gail India subsidiary Mahanagar Gas (MGL) on Friday announced a steep reduction in the retail price of CNG by Rs 8/kg and domestic PNG by Rs 5/SCM across its licenced area.
The move comes on the heels of the Centre revising the pricing methodology as proposed by the Kirit Parikh committee.
The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, had approved the revised domestic natural gas pricing guidelines for gas produced from nomination fields of ONGC/OIL, New Exploration Licensing Policy (NELP) blocks and pre-NELP blocks, where Production Sharing Contract (PSC) provides for government’s approval of prices.
The price of such natural gas shall be 10% of the monthly average of Indian Crude Basket and shall be notified on a monthly basis.
For the gas produced by ONGC & OIL from their nomination blocks, the Administered Price Mechanism (APM) price shall be subject to a floor and a ceiling. Gas produced from new wells or well interventions in the nomination fields of ONGC & OIL, would be allowed a premium of 20% over the APM price.
APM gas makes up for most of CNG and kitchen gas supplies.
Ministry of Petroleum & Natural Gas said that the new guidelines are intended to ensure stable pricing regime for domestic gas consumers while at the same time providing adequate protection to producers from adverse market fluctuation with incentives for enhancing production.
Moreover, government has targeted to increase the share of natural gas in primary energy mix in India from current 6.5% to 15% by 2030. The reforms shall help expand the consumption of natural gas and will contribute to achievement of target of emission reduction and net zero.
With the provision of a floor in gas prices as well as provision for 20% premium for new wells, this reform will incentivise ONGC and OIL to make additional long term investments in the upstream sector leading to greater production of natural gas and consequent reduction in import dependence of fossil fuels.
The revised pricing guidelines will also promote lower carbon footprint through the growth of gas-based economy.
Currently, the domestic gas prices are determined as per the new Domestic Gas Pricing Guidelines, 2014 which were approved by government in 2014.
The 2014 pricing guidelines provided for declaration for domestic gas prices for a 6 month period based on the volume weighted prices prevailing at four gas trading hubs – Henry Hub, Albena, National Balancing Point (UK), and Russia for a period of 12 months and a time lag of a quarter.
As the earlier guidelines based on 4 gas hubs had a significant time lag and very high volatility, the need for this rationalisation and reform was felt, the ministry added.
The revised guidelines make prices linked to crude, which is a practice now followed in most industry contracts, is more relevant to our consumption basket and has deeper liquidity in global trading markets, on a real time basis.
With the changes now approved, data of Indian Crude basket price from the previous month would form the basis for APM gas price determination.
(With PTI inputs)
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