The government decision to double natural gas prices from April next year will translate into a hike of Rs 8.20-Rs 11.72 per kg in CNG rates in cities like Delhi and Mumbai.
The government had in late June decided to price all domestically produced natural gas at an average of global hub rates and cost of imported LNG. Accordingly,gas price is expected to be in the range of USD 8.2 to 8.4 per million British thermal unit in April as against current USD 4.2.
“If it is presumed that the city gas distribution entity is operating entirely on domestic gas,the impact of USD 1 per mmBtu increase in price of domestic gas would result in a price hike of Rs 2.93 per kg of CNG,” Minister of State for Petroleum and Natural Gas Panabaaka Lakshmi said.
While CNG supplier in national capital Indraprastha Gas sources 70 per cent of its needs from domestic fields,Mahanagar Gas Ltd buys almost all of its gas from domestic producers. Also,CNG retailers in Gurgaon and Faridabad source almost all of their gas needs from domestic fields.
For cities like Mumbai,the USD 4 per mmBtu hike in natural gas price will translate into Rs 11.72 per kg increase while in Delhi the increase may be about Rs 8.2 per kg.
CNG or compressed natural gas in Delhi currently costs Rs 41.90 per kg and the same in Mumbai is priced at 35.95.
Lakshmi also said a USD 1 per mmBtu increase in gas price would result in USD 24.893 per tonne hike in urea production cost. This additional production cost would be the increase in subsidy the government paid on urea.
“So long as the MRP of urea is not increased by the government,there will be no impact on the farmers,” she said.
On power,a USD 1 per mmBtu increase in gas cost would result in cost of electricity generation going up by 45 paisa per unit.
“The impact of increase of gas price and likely measures to minimise the burden on power sector is being carried out by Ministry of Power,” she added.
“Government has approved the gas price formula based on the Rangarajan Committee recommendations,which will be applicable from April 1,2014 for a period of 5 years,” Lakshmi said.
The gas price from April 1 would be weighted average price of Indian imports and rates at international hubs like Henry Hub of US,National Balancing Point of UK and Japan imported gas netback price.
“These guidelines will be applicable to all natural gas produced domestically,irrespective of the source,whether conventional,shale or coal-bed methane,” she said.
But the pricing guidelines would not apply where prices have been fixed contractually for a certain period of time or are governed by a specific formula.