NEW DELHI: A day after announcing the revised gas pricing norms, the government on Friday announced the natural gas price of USD 7.92 per unit for April 2023, but as per the new price formula the same will be capped at USD 6.5 per unit.
The new gas pricing norms issued on Thursday (April 6, 2023), under which gas price will be determined based on average crude price basket of the previous month’, but with a floor and ceiling price of USD 4/mmBtu and USD 6.5/mmBtu, respectively. “For the gas produced by ONGC and OIL from their nomination fields, the price shall be subject to a ceiling of USD 6.5 per mmBtu,” a government order said.
Experts opine that city gas distributors could reduce prices of compressed natural gas (CNG), used by vehicles, and piped natural gas (PNG), used by homes, by 9-11 per cent. The move will lead to Rs 9.5 per kg decline in CNG and Rs 6/scm fall in PNG. For the government, it will help raise the share of gas in India’s energy mix to 15 per cent by 2030 from 6.2 per cent at present, and will also bring down fertilizer subsidy by about Rs 1,400 crore on a full-year basis.
“Had the previous pricing regime continued, prices would have likely risen,” said CRISIL in a statement.
To illustrate the new pricing mechanism, if the crude basket in March 2023 was USD 78.54 a barrel, then as per the new formula, the administrative price mechanism (APM) price for April will be USD 7.85/mBtu. Since it is higher than the cap, ONGC and Oil India will get USD 6.5/mBtu.
“While the provision of a cap in gas prices is positive from a consumer’s perspective, the provision of a floor and 20 per cent premium for production from new wells will incentivise additional investments by upstream producers. The gas price fall should lead to a Rs 9.5/kg fall in CNG rates and Rs 6/scm fall in PNG(d) rates if fully passed on to consumers,” said Prashant Vasisht, vice-President and co-head, ICRA. Last year, the government had formed a panel headed by Kirit Parikh to review gas pricing. The earlier pricing formula was fixed using four global gas benchmarks.
CNG, PNG prices may go down by 9-11 per cent
The new gas pricing norms issued on Thursday (April 6, 2023), under which gas price will be determined based on average crude price basket of previous month of a month’, but with a floor and ceiling price of USD 4/mmBtu and USD 6.5/mmBtu, respectively. Experts opine city gas distributors could reduce prices of CNG, used by vehicles, and PNG, used by homes, by 9-11 per cent.