Gas price hike: Little impact seen on CNG, PNG rates
By Arunima Bharadwaj
The recent hike in the prices of natural gas is unlikely to put any significant upward pressure on the domestic Compressed Natural Gas (CNG) or Piped Natural gas (PNG), as bulk of the gas for these sectors comes from nomination fields of state-run ONGC and Oil India, prices of which are capped at $6.5 per million British thermal units (mmBtu), analysts say.
Despite the recent rise in crude oil prices because of supply cuts by Organization of the Petroleum Exporting Countries, the nomination-field gas prices are capped at $6.5 per million British thermal units (mmBtu) for two years. “Bulk of the gas for CNG and PNG are sourced from the nomination fields. Prices should not be rising much for consumers of CNG and PNG even if the Indian crude oil basket prices rise further in the short term,” said Prashant Vashisht, vice-president of ICRA, a credit rating agency.
The government on Sunday increased the prices of domestic natural gas from $8.60 per metric million British thermal unit (mmBtu) to $9.20 per mmBtu for the month of October.
However, it left prices of gas produced by ONGC and OIL from their respective nomination fields unchanged at $6.5 mmBtu.
“For every $1 increase in prices of domestic gas prices, there would be about 4.5-4.7 rupees per kg increase in the prices of CNG,” Vashisht said. However, this will happen only if a full pass through to consumers occur, which is unlikely.
The government had earlier in April revised the method for determining natural gas prices and had started taking into account the prices of Indian crude basket for the same. Gas prices are now 10% of the average price of Indian crude basket in the preceding month.
As per data from Petroleum Planning and Analysis Cell,
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