CNG, PNG get 10% cheaper from tomorrow under revised guidelines
The Centre's decision on Thursday to link domestic gas prices to crude oil will reduce the price of compressed natural gas (CNG) and piped natural gas (PNG) from Saturday. Under the new pricing mechanism, a cap has been imposed to rein in runaway prices, which is 24% lower than current prices. This will make PNG 10% cheaper while CNG will cost 6-9% less.
Why does this story matter?
The move comes as a relief for Indian households dependent on cooking gas. It is also set to reduce the impact of the international market on domestic gas prices. India is also trying to increase the share of natural gas in the primary energy mix from the current 6.5% to 15% by 2030 to reduce emissions and carbon footprint.
CNG, PNG to cost Rs. 6 less in Delhi
Following this, CNG and PNG are expected to cost Rs. 6 less per unit in Delhi. CNG will become cheaper by Rs. 8 in Mumbai, while PNG's price will be reduced by Rs. 5. Bengaluru will also see a Rs. 6-drop in gas prices.
APM gas to cost 10% of monthly Indian Basket
Under the new pricing formula, Administered Pricing Mechanism (APM) gas will be priced at 10% of the monthly average price of the "Indian Basket," which is a mix of crude imported by Indian refiners. APM gas is produced from legacy or old fields owned by state-run Oil and Natural Gas Corporation (ONGC) or Oil India Limited (OIL).
Floor of $4/mmBtu, ceiling of $6.5/mmBtu for APM gas approved
The cabinet also approved a floor of $4 per million metric British thermal units (mmBtu) for APM gas and ceiling of $6.5 per mmBtu against the current rate of $8.57. As per the Domestic Gas Pricing Guidelines, 2014, gas prices are currently fixed based on surplus nations' four natural gas trading hubs—Henry Hub (United States), Alberta (Canada), National Balancing Point (United Kingdom), and Russia.
Prices to be revised every month instead of six months
The prices will now be decided every month instead of revising them every six months. Announcing the decision on Thursday, Union Minister Anurag Singh Thakur said the government will issue a notification in this regard on Friday, and it will come into force from Saturday.
