The Cabinet Committee on Economic Affairs (CCEA) on Thursday revised the natural gas pricing guidelines for gas produced in the country where Production Sharing Contract (PSC) provides for Government’s approval of prices. The Centre said the move would ensure stable pricing regime for domestic gas consumers and would also provide adequate protection to producers from adverse market fluctuation with incentives for enhancing production.
Announcing the decision, Union Minister Anurag Thakur said the CNG and PNG prices would see a drop of ₹5 for a kilo in major cities. “This is a 10% decrease in the prices,” he said.
“The reforms will lead to significant decrease in prices of piped natural gas (PNG) for households and Compressed Natural Gas (CNG) for transport,” the government said.
“The reduced prices shall also lower the fertiliser subsidy burden and help the domestic power sector. With the provision of a floor in gas prices as well as provision for 20% premium for new wells, this reform will incentivise ONGC and OIL to make additional long term investments in the upstream sector leading to greater production of natural gas and consequent reduction in import dependence of fossil fuels.”
Currently, the domestic gas prices are determined as per the new Domestic Gas Pricing Guidelines, 2014 which were approved by Government in 2014.
The 2014 pricing guidelines provided for declaration of domestic gas prices for a six-month period based on the volume weighted prices prevailing at four gas trading hubs - Henry Hub, Albena, National Balancing Point (UK), and Russia for a period of 12 months and a time lag of a quarter.
A Government release said the price of natural gas shall be 10% of the monthly average of Indian Crude Basket and shall be notified on a monthly basis. “For the gas produced by ONGC & OIL from their nomination blocks, the Administered Price Mechanism (APM) price shall be subject to a floor and a ceiling. Gas produced from new wells or well interventions in the nomination fields of ONGC & OIL, would be allowed a premium of 20% over the APM price,” the Centre said.
The Government said it has targeted to increase the share of natural gas in primary energy mix in India from current 6.5% to 15% by 2030. “The reforms shall help expand the consumption of natural gas and will contribute to achievement of target of emission reduction and net zero,” the release added.