ET Now | CNG, PNG to get cheaper? Union Cabinet revises domestic gas pricing formula - Details

Apr 07,2023

Union Cabinet revises domestic gas pricing formula - On Thursday, the Union Cabinet approved a change to the natural gas pricing formula and placed a cap to cut the cost of CNG and piped cooking gas by up to 10 per cent.

After a meeting of the Cabinet, Union I&B Minister Anurag Thakur told reporters that natural gas produced from legacy or old fields, known as APM gas, will now be indexed to the price of imported crude oil rather than benchmarking it to gas prices in four surplus countries like the US, Canada, and Russia.

According to a PTI report, APM gas will be priced at 10 per cent of the price of basket of crude oil that India imports (Indian basket of crude oil). The rate such arrived at however will be capped at $6.5 per million British thermal unit. There will also be a floor or base price of $4 per mmBtu.

The ceiling price is lower than the current rate of $8.57 per mmBtu and would translate into a reduction in prices of piped cooking gas as well as CNG sold to automobiles. Piped cooking gas prices will be cut by up to 10 per cent across cities while CNG will see a little lower reduction. Rates of piped cooking gas, called PNG, and CNG have jumped 80 per cent in one year to August 2022. This follows a spurt in international energy prices, as per PTI report.

In Delhi, the price of CNG would be reduced as a result of the decision from Rs 79.56 per kg to Rs 73.59, and the price of PNG will drop from Rs 53.59 per thousand cubic metres to Rs 47.59. CNG will cost Rs 79 per kg in Mumbai as opposed to Rs 87, while PNG would cost Rs 49 per scm as opposed to Rs 54.

The price of the Indian crude oil basket is currently $85 per barrel; 10 per cent of that equates to a price of $8.5; however, the cap would result in APM gas producers, ONGC, and Oil India Ltd. receiving just $6.5 per mmBtu.

PTI report quoted Union minister Anurag Thakur saying that these caps and floor prices will be for two years and rates will increase by $0.25 per mmBtu per year thereafter. The changes in the gas pricing formula are based on the recommendations of a committee under Kirit Parikh.