The price of CNG and PNG will increase from October as the government in accordance with the new domestic gas policy will revise prices of natural gas for the October-March period. As per the calculations of Care Ratings, the hike could be made by as much as 12% to about $3.43/mmBtu from $3.06/mmBtu currently. The revised prices are expected to be announced on September 28.
In a report Care Ratings said, "Rise in the natural gas price will result in the increase in the cost of manufacturing of urea and petrochemicals where natural gas is used as a feedstock. There will be a rise in the prices of CNG and PNG which will affect the consumers".
Further the report added, "Increase in price of Natural gas will also affect the margins of the power sector and sponge iron industry where it is used for the generation of energy".
For the April-September period, the price of domestic natural gas was hiked from $2.89 per mmBtu to $3.06 per mmBtu. The price of natural gas is revised half-yearly based on the average price in gas-surplus countries including the US, Canada and Russia. The increase in natural gas price will hit the pockets of domestic consumers and some manufacturing industries; nonetheless it will prove to be beneficial for upstream gas exploration companies like OIL India, Reliance, Vedanta and ONGC.
The report highlighted, "The rise in the domestic natural gas price will result in increasing the WPI marginally as crude petroleum and natural gas has a 2.46% weight and in that natural gas has a 0.46% weight". So, the effect of price hike in natural gas will also be seen on the inflation numbers.