After over a two-year hiatus, the Central government on Thursday hiked by 62 per cent the price of natural gas primarily used to produce electricity, make fertilisers, and turned into CNG to use as fuel in automobiles and cooking gas for household kitchens.
This last increase in rates was back in April 2019 and has since only fallen due to a drop in global benchmark rates.
As per reports, this means that the surge in gas price is likely to result in a 10-11 per cent rise in CNG and piped cooking gas rates in cities such as Delhi and Mumbai. 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.
The oil ministry's Petroleum Planning and Analysis Cell (PPAC) said the rates paid for gas produced from fields given to state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) will be USD 2.90 per million British thermal units for the six-month period beginning April 1.
Simultaneously, the price for gas produced from difficult fields such as deepsea, which is based on a different formula, was hiked to USD 6.13 per mmBtu from the current USD 3.62 per mmBtu.
Natural gas price is set every six months — on April 1 and October 1 — 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.
So the price for October 1 to March 31 is based on the average price from July 2020 to June 2021. The recent spurt in rates will get reflected in prices that become effective from April next year.
