The government may raise domestic natural gas price next week to its highest level in two years, a move that will translate into higher CNG price and increase cost of electricity and urea production.
Price paid to most of natural gas produced from domestic fields is likely to be hiked to USD 3.06 per million British thermal unit from April 1, from current USD 2.89, sources privy to the development said.
Natural gas prices are set every six months based on average rates in gas-surplus nations like the US, Russia and Canada.
India imports half of its gas which costs more than double the domestic rate.
The USD 3.06 per mmBtu rate would be for six months beginning April 1 and will be the highest since April-September 2016 when a similar price was paid to domestic producers.
The increase in price will boost earnings of producers like Oil and Natural Gas Corp (ONGC) and Reliance Industries but will also lead to a rise in CNG price, which uses natural gas as input. It would also lead to higher cost of urea and power production.
Gas price was last hiked to USD 2.89 per mmBtu for October 2017 to March 2018 period from USD 2.48 in the previous six months. This was the first hike in nearly three years.
The government is also likely to hike the cap price based on alternate fuels for undeveloped gas finds in difficult areas like deepsea, which are unviable to develop as per the existing pricing formula. The price for such fields is likely to be USD 6.5-6.6 per mmBtu for six month beginning April 1 as compared to USD 6.3 currently.
The price hike in October had come after five rounds of reduction, the last being on April 1.
As per the new gas pricing formula approved by the NDA-government in October 2014, gas prices are to be revised every six months. Read More
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