Domestic Gas Price Raised 62% For Oct-March Period

The government raised the price of natural gas by 62 percent on Thursday, which is used to generate power, produce fertilizers, and be converted into compressed natural gas (CNG) for use as a vehicle fuel and cooking gas.

Lower production combined with rising demand increased North American and European gas prices, prompting the Union government to hike the price of locally produced gas by 62 percent to $2.90 per million British thermal units (mmBtu).

The ceiling price for gas generated from problematic fields - which have higher pricing and marketing freedom - has been hiked by 69 percent to $6.13 per million British thermal units.

The decision might have negative consequences for businesses such as power and fertilizers, as well as raise inflation and put a burden on the country's current account. Farmers may be impacted if the government does not increase fertilizer subsidies to counteract the surge in imported urea and DAP prices. The price increase may be passed on to customers by city gas stations.

Starting October 1, the new prices will be in effect for six months. Natural gas prices have an impact on state-owned companies like Oil and Natural Gas Corp Ltd and Oil India Ltd.

It will also raise the cost of generating electricity, but consumers are unlikely to notice a significant increase because gas-fired power accounts for a small percentage of total electricity generation.

"The price of domestic natural gas is USD 2.90 per mmBtu on a Gross Calorific Value (GCV) basis for the period 1 October 2021 to 31 March 2022," according to PPAC.

Natural gas prices are determined twice a year, on 1 April and 1 October, and are based on rates in surplus countries like as the United States, Canada, and Russia.