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Cooking gas, CNG prices may increase in April; here's why

BusinessToday.In     March 14, 2019

The price of natural gas price may go up by as much as 18% from April 2019, according to CARE Ratings' report. This could lead to a definitive rise in prices for domestic cooking gas bill and auto CNG prices. Not only this, the hike might lead to an impact on manufacturing, travel, energy, and inflation too.

As per the New Domestic Gas policy of 2014, which suggests revising natural gas prices every six months, the government may be revising domestic gas prices effective from 1 April 2019, according to the report. The prices of natural gas produced in deep water and high-pressure high temperature may also be revised.

"We believe the prices of domestic natural gas for the April 2019-September 2019 period will increase from the current $3.36/mmBtu to approximately, $3.97/mmBtu, resulting in an 18% increase," said a report by CARE Ratings.

This rate hike might provide relief to upstream gas producers and help increase revenues for upstream gas exploration companies such as ONGC, OIL India, Vedanta, and Reliance, said the report.

However, at the same time, it would mean an increase in prices of compressed natural gas (used in auto fuel) and PNG (used in households as cooking gas) as it would lead to higher raw material cost affecting consumers adversely.

It would also mean higher feedstock cost for power generation and manufacturing of fertilisers and petrochemicals and may also hit producers of the power sector and sponge iron industry, where it is used for the generation of energy.

An increase in prices of domestic natural gas will also lead to a rise in wholesale price index (WPI) inflation, which gives 0.46 percent weightage to the natural gas of the total 2.46 percent weightage given to crude petroleum and natural gas.

The domestic gas prices are calculated by taking into account the prices of natural gas in USA (Henry Hub), UK (New Balancing Point), Canada (Alberta Gas) and Russia (Russian Natural Gas).

(Edited by Rupa Burman Roy)

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