NEW DELHI: The government on Thursday approved a revised natural gas pricing formula and imposed ceiling price to help cut CNG and piped cooking gas prices As per the new guidelines, for the gas produced by ONGC & OIL from their nomination blocks, the administered price mechanism (APM) price should be subject to a floor and a ceiling. The price of natural gas produced from legacy or old fields should be 10% of the monthly average of Indian Crude Basket and should be notified on a monthly basis.
I&B Miniser Anurag Thakur told reporters after the Cabinet meeting the natural gas produced from legacy or old fields, known as APM gas, will now be indexed to price of imported crude oil instead of benchmarking it to gas prices in four surplus nations like the US, Canada and Russia.
The rate arrived at will be capped at $6.5 per million British thermal unit. There will be a floor price of $4 per mmBtu. The ceiling price is lower than the current rate of $8.57 per mmBtu and will translate into a reduction in prices of PNG as well as CNG sold to automobiles, he said. Thakur said prices of PNG will fall by up to 10% across cities, while CNG will see a little lower reduction. PNG and CNG rates have jumped in last one year.
Currently, Indian crude oil basket is priced at $85 per barrel and 10% of that translates into a price of $8.5 but the cap would mean for the APM gas produces, ONGC and Oil India will get only $6.5 per mmBtu. He said these caps and floor prices will be for two years and rates will increase by $0.25 per mmBtu a year thereafter.
The revised gas pricing formula is based on the recommendations of Kirit Parikh committee.