Png: CNG, PNG to become cheaper as gas price indexed to crude

NEW DELHI: Compressed natural gas (CNG) and piped natural gas (PNG) will become cheaper by up to 10% as the Cabinet on Thursday decided to link domestic gas prices to crude oilwith a cap 24% lower than the current rate, snapping linkages to gas hubs in surplus markets such as the US, Canada and Russia.
Gas produced from legacy fields of state-run ONGC and Oil India Ltd will henceforth be priced at 10% of the monthly average of ‘Indian Basket’— the mix of crude imported by Indian refiners — with a floor of $4 per unit (mmBtu or million metric British thermal unit) and ceiling of $6.5 against the current gas price of $8.57.

In Delhi, both CNG and PNG are expected to become cheaper by Rs 6 per unit. CNG will cost Rs 8 per kg less in Mumbai, while consumers will have to pay Rs 5 less for per unit of PNG. In Bengaluru too consumers will gain by Rs 6. The benefit in other cities with gas service will vary due to factors such as local taxes and the supplier allocation of domestic gas.
Oil minister Hardeep Singh Puri described the decision as a continuation of initiatives taken under prime minister Narendra Modi’s leadership to protect the interest of consumers by reducing the impact of soaring international gas prices.
“The new guidelines intend to ensure stable pricing regime for domestic gas consumers, while at the same time provide adequate protection to producers from adverse market fluctuation with incentives for enhancing production,” he said in a tweet.
Gas price will be revised monthly based on the Indian basket instead of the current system of revision every six months — on April 1 and October 1 every year — based on a six-monthly rolling average of gas prices at global hubs.
The ceiling will be valid for two years after which it will be raised by 25 cents every year, information minister Anurag Singh Thakur said after the Cabinet meeting. He said the decision has been taken with view to protecting interests of both consumers and producers.
The new formula also provides a 20% premium on incremental increase in production from the legacy fields that were given to ONGC and OIL before the the New Exploration Licensing Policy formulated in 1997-98 for auctioning acreages. The premium is aimed at encouraging technology induction, Thakur said.
The formula will not apply to the auctioned fields that enjoy pricing and marketing freedom or geographically difficult fields that have a different pricing regime formulated in 2016.
The new formula mostly follows recommendations made by a panel under economist Kirti Parikh tasked with reviewing the pricing policy for legacy fields after domestic gas prices rose from $1.79 per unit in October 2020 to $8.57 in October 2022 due to a spike in international gas rates, pushing up CNG and PNG prices. India meets 50% of its gas demand through imports. The government has set a target of raising the share of natural gas in the country’s energy basket to 15% by 2030 from a little over 6% at present.
Watch Govt changes gas pricing formula, caps rates to rein-in CNG, piped cooking gas prices