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NEW DELHI: After petrol and diesel, consumers using CNG (compressed natural gas) and PNG (piped natural gas) will have to pay more from October 1 as the benchmark price for natural gas produced from domestic fields is expected to hit a 28-month high during the routine six-monthly revision.
A weak rupee is expected to amplify the impact since the price is set in dollars. Higher gas price will raise the cost of manufacturing urea, which uses domestic gas as feedstock just like companies providing CNG and PNG services. But the impact on power tariffs will marginal as only 5-6% of total electricity comes from gas-fired plants.
The price increase will, however, shore up the fortunes of producers such as Reliance Industries and Cairn from the private sector as well as state-run ONGC and OIL at a time when they are altogether investing more than $10 billion into new projects. For ONGC, it couldn’t be a better time since the company is paying off loans it took to buy refiner-retailer HPCL for Rs 36,000 crore.
All these companies have been grumbling since October 2014, when the new gas pricing regime was introduced. Since the new pricing formula soon had seen benchmark gas prices sliding every six months in tune with the fall in rates at global gas trading hubs, the companies maintained that such low prices made their gas field operations unviable.
India imports half of its gas which costs more than double the domestic rate. Indian gas prices are calculated by taking weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter. So, the rate for October 2018 to March 2019 is based on average price at the international hubs during April 2017 to March 2018.
Indications are that the base price of gas from domestic fields is expected to rise 14% to $3.5 per unit, the highest since $3.82 per unit for the six months ended March 2016. Natural gas prices are set every six months based on average rates in gas-surplus markets such as the US, Canada, UK and Russia.
A weak rupee is expected to amplify the impact since the price is set in dollars. Higher gas price will raise the cost of manufacturing urea, which uses domestic gas as feedstock just like companies providing CNG and PNG services. But the impact on power tariffs will marginal as only 5-6% of total electricity comes from gas-fired plants.
The price increase will, however, shore up the fortunes of producers such as Reliance Industries and Cairn from the private sector as well as state-run ONGC and OIL at a time when they are altogether investing more than $10 billion into new projects. For ONGC, it couldn’t be a better time since the company is paying off loans it took to buy refiner-retailer HPCL for Rs 36,000 crore.
All these companies have been grumbling since October 2014, when the new gas pricing regime was introduced. Since the new pricing formula soon had seen benchmark gas prices sliding every six months in tune with the fall in rates at global gas trading hubs, the companies maintained that such low prices made their gas field operations unviable.
India imports half of its gas which costs more than double the domestic rate. Indian gas prices are calculated by taking weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter. So, the rate for October 2018 to March 2019 is based on average price at the international hubs during April 2017 to March 2018.
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