Domestic gas prices likely to rise 57% from next month

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A new round of hike in prices of CNG and piped cooking gas could be on the cards, as ICICI securities has predicted prices of gas to rise by 57% from next month. The price hike would be the result of the international prices-fed formula that is used by the government in revising domestic natural gas prices every April and October, the Economic Times stated, quoting a report of ICICI securities. According to the report, the price of natural gas will increase from the present $2 per Metric Million British Thermal Unit (mmBtu) to $3.15 per (mmBtu).

What the officials said about it

Earlier this year, in July, the Business Standard had quoted the Managing Director of ONGC as saying, “The price of domestically produced natural gas will increase by 50-60% for the October 2021-March 2022 period.”

The domestic price is likely to remain below $3 per mBtu and the ceiling price of gas from difficult discoveries will be less than $6 per mBtu despite the imminent hike, the BS report added.

Gas distributors to pass on the burden

According to the brokerage firm, as quoted by the ET, the hike in domestic gas price would mean those city gas distributors— Gujarat Gas, Mahanagar Gas and Indraprastha Gas— would have to make price hikes of 10-11% in October. The gas companies had the leverage to hike their prices since the fuel prices including that of petrol and diesel have gone up.

Since 2014, the price of domestic gas has been determined by a formula that takes into account ‘the weighted average of the natural gas price at global gas hubs’.

On the other hand, the upper limit of the price of gas from ‘difficult discoveries’ is tied to the landed price of alternate fuels and prices of both are said to rise or fall simultaneously. The domestic prices of gas are calculated after taking the international prices into account, but with a lag of a few months, which is why the government revises its prices every April and October.