Home / News / India /  Domestic gas price hiked for Oct-March period, CNG rates may go up. Check details

The price of natural gas was hiked by 62% on Thursday, a central government order said. 

Natural gas – which is used to make fertilisers, produce electricity and is turned into CNG for automobiles – will now be priced at USD 2.90 per million British thermal unit for the six month period beginning 1 October.

The new price represents a 62% increase from the April-September 2021 price of $1.79/mmBtu, which was the lowest since 2014.

The rate for gas produced from difficult fields such as deepsea would be USD 6.13 per mmBtu from $3.62 per mmBtu in the prior six-month period, the statement read.

The prices will be applicable on a gross heat value basis.

The hike comes on the back of firming benchmark international prices but does not reflect the spurt in spot or current price of liquefied natural gas (LNG) witnessed during the last couple of weeks.

Natural gas prices affect the earnings of state-run producers such as Oil and Natural Gas Corp Ltd and Oil India Ltd.

This is the maximum price that Reliance Industries Ltd and its partner BP plc are entitled to for the gas they produce from deepsea blocks such as KG-D6.

The increase in gas price is likely to result in a 10-11% rise in CNG and piped cooking gas rates in cities such as Delhi and Mumbai, industry sources said.

It will also lead to a rise in the cost of generating electricity but consumers may not feel any major pinch as the share of power produced from gas is very low.

Similarly, the cost of producing fertiliser will also go up but as the government subsidises the crop nutrient, an increase in rates is unlikely.

At the last revision in April this year, rates paid to ONGC were left unchanged at UD 1.79, while the deepsea gas price was cut from USD 4.06 per mmBtu to USD 3.62.

A USD 1 increase in gas price results in 5,200 crore revenue for ONGC on an annualised basis. After accounting for taxes and other levies, it translates into 3,200-3,300 crore in EBDITA for the company, sources said.

Gas prices were last raised in April 2019 and have since only fallen due to a drop in global benchmark rates.

While the government sets the price of gas produced by ONGC from fields given to it on a nomination basis, it bi-annually announces a cap or maximum price that operators who won exploration acreage under licensing rounds can get.

The operators are supposed to do a market price discovery by seeking bids from users but that rate is subject to the price ceiling announced by the government, sources said.

Reliance-BP had in the recent price discovery for new gas from their Krishna Godavari basin block, got rates of over USD 6 per mmBtu.

"The price of domestic natural gas for the period 1 October 2021, to 31 March 2022, is USD 2.90 per mmBtu on Gross Calorific Value (GCV) basis," PPAC said.

Similarly, "the price ceiling" for gas produced from "discoveries in deepwater, ultra-deepwater and high pressure-high temperature areas" is USD 6.13 per mmBtu, it said.

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

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

Trending Stocks

Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout