Govt revises pricing formula, CNG, PNG to cost 10% less from tomorrow

The move will make PNG or cooking gas cheaper by 10 per cent and lower the cost of CNG by 6-9 per cent, Thakur said, adding that the government will issue a notification in this regard on Friday (April 7) and the decision will be implemented from April 8 (Saturday). The decision is likely to bring down the price of CNG by Rs 5-8 a kg in various parts of the country and that of PNG by Rs 5-6.5 per SCM (standard cubic metre).

Natural gas produced from legacy or old fields will now be indexed to crude oil price, instead of pricing it based on gas prices in surplus nations such as the US, Canada and Russia, Thakur told reporters.

The Union Cabinet has approved the revised domestic natural gas pricing guidelines for gas produced from nomination fields of ONGC/OIL, New Exploration Licensing Policy (NELP) blocks and pre-NELP blocks, where production sharing contract provides for government’s approval of prices, a government statement said.

The price of such natural gas shall be 10 per cent of the monthly average of Indian Crude Basket and shall be notified on a monthly basis. For the gas produced by ONGC and OIL from their nomination blocks, the administered price mechanism (APM) shall be subject to a floor and a ceiling. However, gas produced from new wells or well-interventions in the nomination fields of ONGC and OIL would be allowed a premium of 20 per cent over the APM price, the minister said.

The new guidelines are intended to ensure a stable pricing regime for domestic gas consumers while at the same time provide adequate protection to producers from adverse market fluctuation with incentives for enhancing production, the statement said.

The government aims to increase the share of natural gas in primary energy mix in India from the current 6.5 per cent to 15 per cent by 2030, the statement said, adding that the reforms will help expand the consumption of natural gas and contribute to achieving the target of emission reduction and ‘net zero’.

The reduced prices will also lower the fertiliser subsidy burden and help the domestic power sector, the government said. The provision of a floor in gas prices as well as provision for 20 per cent premium for new wells will incentivise ONGC and OIL to make additional long-term investments, leading to greater production of natural gas and consequent reduction in import dependence on fossil fuels. The growth of the gas-based economy will also lower the carbon footprint, it said.

Currently, the domestic gas prices are determined as per the 2014 Domestic Gas Pricing Guidelines, which provides for declaration of prices for a six-month period based on the volume weighted prices prevailing at four gas trading hubs — Henry Hub, Albena, National Balancing Point (UK), and Russia for a period of 12 months and a time lag of a quarter.

While the 2014 guidelines had a significant time lag and very high volatility, the revised guidelines will make prices linked to crude oil, a practice now followed in most industry contracts.