1309239 SIP myths you must know!

State-run city gas distributor Mahanagar Gas Limited (MGL) has undertaken CNG price cut of Rs 2.5/kg in Mumbai. The mobility fuel will now cost Rs 73.50/kg in India’s commercial capital. While, so far, there has been no revision in the Piped Natural Gas (PNG) prices by MGL in Mumbai which will continue to be sold at Rs 47/SCM. While, CNG and PNG prices continue to remain frozen in the national capital, New Delhi. Indraprastha Gas Limited (IGL) which is responsible for distribution of natural gas in Delhi has not yet reduced CNG and PNG prices there. Albeit, it is expected that natural gas prices will be slashed across the nation in coming days owing to the change in method made by the Government of India to derive natural gas prices in the country.

What is the new method for pricing of CNG and PNG in the country?

Last year, the GoI changed the method used to derive CNG and PNG prices in the country.  Subsequently, the government has linked domestically produced natural gas prices to India’s crude oil basket. Plus, the determined prices will not be more than 10 per cent of that of India’s crude oil basket. Moreover, the government has also put a cap of 8.5 mmBtu  on price derived by use of the new method. mmBtu stands for metric million British Thermal Unit. It is a unit of measurement of natural gas. The change in method is expected to bring down price of natural gas by 10 per cent in the country. Plus, prices will now be revised on monthly basis.

What was the old method?

Earlier, the natural gas prices in India were benchmarked with gas prices of four countries which were the US, Canada, Russia and Saudi Arabia. On basis of this, government authorities used to revise India prices every six months.

Will CNG, PNG become cheaper in near term?

Because the government changed the price derivation method, even if natural gas prices rise globally in near future, CNG and PNG prices will not rise in India at least in near future. On Wednesday, MGL cut CNG prices. It is expected that sooner or later, IGL will also take price cut in Delhi, because according to Information and Broadcasting Minister Anurag Thakur, the governmet’s decision to bring in the new method will translate to downward price revision of 10 per cent.

Has CNG, PNG already become cheaper?

Compared to year ago level, CNG and PNG prices have already reduced in the since April 1, 2023. In Mumbai, CNG prices have corrected by Rs 13.50/kg from Rs 87/kg in April 2023 to Rs 73.50/kg on March 6, 2024. While, PNG prices in Mumbai have corrected by Rs 8/SCM in March 2023 to Rs 46/SCM.

Whether domestic natural gas prices will fall or increase, it also depends on interntional crude oil prices. On Wenesday, Brent crude oil prices traded arond Rs 82/barrel. Current, international crude oil prices are at same level where prices were a year ago.