New Delhi: The price of natural gas produced from inherited fields of NGOs and Oil India Ltd. will increase by almost 4% as of today (April 1) after the government raised the limit. This movement will have a marginal impact on the city’s gasoline operators, but the jury is available if it will immediately lead to an upward review in the retail rates of CNG and PNG.
According to a notification of the Petroleum Ministry market tracker, the oil planning and analysis cell, the gas price has been reduced to $ 7.26 per unit (millions of British thermal unit) for April from $ 7.8 in March. Even so, the effective price to consume industries has increased by 25 cents because the center simultaneously increased the limit of $ 6.50 unit to $ 6.75.
The Government had linked in April 2023 domestic gas prices with the ‘Indian basket’, or the crude oil mixture bought by Indian refineries, after discarding the previous formula based on reference rates in gas gas markets such as the United States, Canada, Europe and Russia. The reviewed formula, based on the recommendations of a panel led by the eminent economist Kirti Parikh, established the price of domestic gas in 10% of the monthly average of the Indian basket in the previous month, with a $ 4 floor and a $ 6.50 limit per unit to protect producers and consumers from volatility.
The Government, however, tempered the recommendation of the Parikh panel to increase the price limit by 25 cents per year to the deregulation by 2027. It closed the limit for a period of two years and reduced the annual increase to 25 cents from April 2025. The limit maintained the effective price to consume industries instead of $ 6.50 per unit despite the highest notified rates. The ascending review on the limit, as expected, will now lead to the first increase in gas prices in two years.
The Government assigns gas inherited from old fields for fertilizer units and PNG operations. Due to a reduction in the allocation as a result of the fall in production, the proportion of inherited gas in the general portfolio of the city’s gase operators has decreased sharply over the years, which makes them dependent on the imported fuel as demand increases. Fertilizer units will also not feel the pinch due to the government’s subsidy.