Government's New Formula over Revision of Gas Pricing; CNG, Piped Cooking Gas To Cost 10% Less

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• Apr 7, 2023 | Poonam Nath

Natural gas generated from legacy or old fields, known as APM gas, will now be indexed to the price of imported crude oil...

Digital Desk: The Union Cabinet approved updated domestic petrol pricing guidelines on Thursday, ensuring stable pricing in the system and enough protection for producers from unfavourable market fluctuations. The price of natural gas will be 10% of the monthly average of the Indian crude basket.

Anurag Thakur, Minister of Information and Broadcasting, said at a press conference following a union cabinet meeting that there will be monthly announcements to ensure stable pricing under the regime and enough protection for producers from adverse market fluctuations. 

"Instead of the worldwide hub petrol price, the petrol price is now related to imported crude and the domestic petrol price would be 10% of the international price of the Indian crude basket, which will be announced monthly" He stated. 

Natural gas produced from legacy old fields, known as APM gas, will now be tied to crude oil pricing rather than gas prices in surplus countries such as the United States, Canada, and Russia, according to Union Minister Anurag Thakur after a cabinet meeting today.

As said by oil Secretary Pankaj Jain, this will reduce the cost of piped natural gas (PNG) by 10% and the cost of compressed natural gas (CNG) by 6% to 9%. The administration will release an announcement about the change tomorrow, and the decision will take effect on Saturday. 

"The price of such natural gas shall be 10% of the monthly average of the Indian Crude Basket and shall be notified monthly," the ministry stated in a statement.

Oil Minister Hardeep Puri tweeted that the action will defend consumers' interests. "The Union Cabinet approves revised domestic petrol pricing guidelines in continuation of various initiatives taken under Prime Minister Narendra Modi's leadership to protect the interests of consumers by reducing the impact of increases in international petrol prices on petrol prices in India," Puri said. 

Advantages of the Revision of Gas Pricing - 

• The change will provide consistent pricing in the regime and enough protection for producers against adverse market fluctuations.

• Prices for Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for transportation will be significantly reduced as a result of the reforms.

• The decreased prices will also reduce the burden of fertiliser subsidies and benefit the local power sector.

• Through the expansion of a gas-based economy, the amended pricing criteria will also promote a lower carbon impact.

• This will also create incentives for increased output. 

Why is this change necessary?

Domestic gas prices are currently set every six months using prices from four gas trading hubs: Henry Hub, Albena, National Balancing Point (Britain), and Russia.

According to the government, the pricing approach based on the four gas hubs had a considerable time lag and very high volatility, necessitating this adjustment.

"The amended standards make prices linked to oil, which is currently a practice in most industry contracts," the government stated. "This is more relevant to our consumption basket and has deeper liquidity in global trading markets on a real-time basis."

The criteria will apply to gas produced from ONGC/OIL nomination fields, new exploration licence policy blocks (NELP), and pre-NELP blocks. The new rules will take effect on Saturday, 8th April 2023.

Also Read: Government's New Formula over Revision of Gas Pricing