The government is mulling to raise natural gas prices from next month, with the benchmark price for gas produced in domestic fields expected to hit a two-year high. If the proposal goes through, it will not only affect your monthly budget for piped natural gas, or cooking gas, but will translate into a hike in prices of CNG, electricity and urea production.
However, the hike will have minimum effect on power tariffs as less than 8 per cent of our total power is produced at gas-fired plants.
India imports half of its gas requirement from gas-surplus nations and spends more than double the domestic rate. The government is expected to raise the natural gas price $3.06 per million British thermal unit from April 1, sources quoted by PTI said. The current price is $2.89.
Prices of natural gas are fixed every six months, which depends on the average rates in gas-surplus nations like the US, Russia and Canada. The price revision is due next week.
The $3.06 per mmBtu rate will be price for the April-September period.
The gas prices in India are determined by taking the weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter.
The current rate is based on the average price at these hubs from January to December 2017.
The hike in cap prices of alternate fuel produced from deep-sea water fields are also due on April 1. The price for such fields is likely to be raised to $6.5-6.6 per mmBtu from $6.3 for the April-September segment.
Industry experts quoted by PTI said the price hike will help increase in earnings of companies, such as Oil and Natural Gas Corp and Reliance Industries, and also help the country in minimising their energy needs and increasing the share of natural gases in its energy mix.
On an annual basis, every dollar hike in gas prices results in Rs 4,000 crore additional revenue for the PSU.
In October 2017, the gas prices were hiked $2.89 per mmBtu from $2.48 in the April-September 2017 after almost three years. Before that there was fall in prices in almost five occasions, the last in April 2017.
ONGC, the biggest gas producer in India, produces more than 70 per cent of the 90 million standard cubic meters a day, India's current output.
Of the total India's gas requirement, almost 50 per cent are met through imports from spot market and long-term contracts. The prices in the spot market vary from $10-12 a unit and it is $10-11 a unit for the long-term contracts.
With inputs from PTI