Govt hikes domestic natural gas price to $7.85 per mmBtu for August

According to the new gas pricing mechanism, domestic gas prices are now subject to a floor and ceiling of $4 per mmBtu and $6.5 per mmBtu, respectively.

The price of domestic natural gas increased to $7.85 per mmBtu (million metric British thermal units) for August versus $7.48 in the previous month, according to a notification by the Oil Ministry.

However, domestic natural gas price will continue to remain at $6.5 per mmBtu for the month, as per the formula used for the calculation of gas prices.

According to the new gas pricing mechanism, domestic gas prices are now subject to a floor and ceiling of $4 per mmBtu and $6.5 per mmBtu, respectively. Domestic gas prices stood at $6.5 per mmBtu in July as well.

The domestic gas price notified by the government applies to the natural gas produced from the legacy and oil fields of Oil and Natural Gas Corporation Ltd (ONGC) and Oil India Limited (OIL).

Under the new pricing regime, domestic gas pricing is linked with imported crude pricing and would be at 10 percent of the Indian crude basket. The prices are revised on a monthly basis.

The new pricing formula comes after a government-appointed panel led by energy expert and former Planning Commission (since renamed NITI Aayog) member Kirit Parikh recommended several changes in gas pricing to immune domestic players and consumers from the volatility in global markets.

The ceiling for natural gas prices will be kept in force for the next two years.