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PNG cooking gas, CNG may get costlier from next month; govt set to raise prices

Eram Tafsir

Domestic cooking gas bill and auto CNG prices may be in for a hike, as the government will likely raise the natural gas price by as much as up to 18% next month, said a report. The government is all set to revise domestic gas prices with effect from 1 April 2019, per the New Domestic Gas policy, 2014, which suggests revising natural gas prices every six months.

The expected up to 18 per cent hike in the domestic natural gas prices might have an impact on manufacturing, travel, energy and inflation, said a report by CARE Ratings. We believe the prices of domestic natural gas for the April 2019-September 2019 period will increase from the current $3.36/mmBtu to approximately, $3.97/mmBtu, resulting in an 18% increase, said CARE Ratings in the report.

The government is also set to revise the prices of natural gas produced in deep water and high pressure high temperature.

The move will likely adversely affect consumers by leading to an increase the prices of CNG (compressed natural gas) used as auto fuel, and PNG (piped natural gas) used in households as cooking gas.

It may also lead to increase in cost of manufacturing of urea and petrochemical, where natural gas is used as a feedstock; and may also hit producers of power sector and sponge iron industry, where it is used for the generation of energy, the report added.

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An increase in prices of domestic natural gas will also lead to a rise in wholesale price index (WPI) inflation, which gives 0.46 per cent weightage to the natural gas of the total 2.46 per cent weightage given to crude petroleum and natural gas.

However, it will increase revenues for upstream gas exploration companies such as ONGC, OIL India, Vedanta and Reliance, said the report.

New Domestic Gas price formula takes into account the prices of natural gas in USA (Henry Hub), UK (New Balancing Point), Canada (Alberta Gas) and Russia (Russian Natural Gas), where prices are market linked in each hub.