Govt increases natural gas price by 40 per cent; CNG, PNG prices may go up

NEW DELHI: The government on Friday raised the price of natural gas by 40%. Natural gas is used to generate electricity or fertiliser and turned into compressed natural gas (CNG). This is the third increase in rates since April 2019 and the reason, the government said, is strengthening of energy prices in the global market.

With this hike, rise in CNG and piped cooking gas rates in cities such as Delhi and Mumbai is imminent. However, it may also lead to rise in cost of generating electricity but common people may not bear the brunt  as the share of power produced from gas is very low. At the same time, this price rise will not impact the cost of producing fertilisers, as the government subsidies the crop nutrient.

As per an order of Petroleum Planning and Analysis Cell (PPAC), a body of the Petroleum ministry, the rate paid for gas produced from old fields, which make up for nearly two-thirds of all gas produced in the country, was hiked to USD 8.57 per million British thermal units from the current USD 6.1. Similarly, the price of gas from difficult and newer fields like the ones in Reliance Industries and its partner bp plc operated deepsea D6 block in KG basin, was hiked to USD 12.6 per mmBtu from USD 9.92. 

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). The steep increase in gas prices is likely to reflect in higher rates for CNG and piped natural gas (PNG), which has in 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 countries such as the US, Canada and Russia in a year with a lag of one quarter.