Government cuts gas price for April to $7.92; ONGC/OIL capped at $6.5

Gas price for Apr at $7.92 but price for ONGC/OIL capped at $6.5: Govt order

The Centre on April 7 announced that natural gas will be priced at $7.92 per million British thermal unit (mmBtu) for the period of April 8 to April 30. However, rates for customer are capped at $6.5/mmBtu.

The revised rate is as per a new pricing formula wherein price is at 10 percent of imported cost of crude oil, as per the Oil Ministry’s Petroleum Planning and Analysis Cell. The new formula was suggested by the Kirit Parikh committee.

The cap has also been set in the order issued. It states: "For the gas produced by ONGC/ OIL from their nomination fields, the price shall be subject to a ceiling of $6.5 per mmBtu.”

Compressed natural gas (CNG) and piped natural gas (PNG) meet close to 70 percent of demand supply. The new formula will be applicable on natural gas produced from legacy or old fields, known as APM (administered price mechanism) gas.

As per the formula this gas will now be indexed to the price of imported crude, instead of benchmarking it to gas prices in four surplus nations of Oman, the United States, Canada and Russia.

Accordingly, APM gas will be priced at 10 percent of the price of the India crude basket, but capped at $6.5/mmBtu. The floor or base price is $4/mmBtu.

The ceiling means an average reduction of 10 percent in CNG and PNG prices for customers as the rate was $8.57/mmBtu.

Soon after the order came, Gail India subsidiary Mahanagar Gas (MGL) on April 7 announced cuts to the retail price of CNG by Rs 8/kg and of PNG by Rs 5/SCM across its licenced area. Revised prices are now Rs 79/kg for CNG and Rs 49/SCM for PNG.

“MGL is pleased to pass the benefit of the source price reduction in domestic gas cost onto its domestic PNG and CNG consumers. Accordingly, the price of CNG is reduced by Rs 8/kg and domestic PNG is down by Rs 5/SCM in and around Mumbai,” a late evening statement from the city gas distributor said.