The Ministry of Petroleum and Natural Gas announced an increase in the price of domestic natural gas for the month of October, marking the second consecutive monthly price hike. The price has been increased to $9.20/mmBtu (Metric Million British Thermal Unit) from $8.60/mmBtu in September.
This price adjustment, part of a new formula, now links the domestic natural gas price to the Indian crude basket's current price, rather than the previous method, which was based on the prices of four major global gas trading hubs - Henry Hub, Albany, National Balancing Point (UK), and Russian gas.
Under this new formula, the price of domestic natural gas is recalibrated every month, offering more frequent adjustments compared to the previous system, where prices changed every six months.
The transition to this new pricing mechanism comes following the recommendations of a committee formed by the government in October 2022. The change reflects an effort to align natural gas prices more closely with current market dynamics, ensuring fair and competitive pricing.
However, this increase in domestic natural gas prices is likely to have downstream effects on consumers, as gas distribution companies may pass on the higher costs, resulting in potential price hikes for Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) for end-users.
The adjustment in pricing highlights the government's ongoing efforts to refine the energy pricing structure and adapt it to changing global energy market dynamics.
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