Gas prices hiked 40 pc; CNG, PNG to cost more

Prices of natural gas, which is used to generate electricity, make fertiliser and is converted into CNG to run automobiles, were on Friday hiked by a steep 40 per cent to record levels, in step with global firming up of energy ratesThe rate paid for gas produced from old fields, which make up for about two-thirds of all gas produced in the country, was hiked to USD 8.57 per million British thermal units from the current USD 6.1, according to an order from the oil ministry’s Petroleum Planning and Analysis Cell (PPAC).Simultaneously, the price of gas from difficult and newer fields like the ones in Reliance Industries Ltd and its partner bp plc operated deepsea D6 block in KG basin, was hiked to USD 12.6 per mmBtu from USD 9.92, the order said.These are the highest rates for administered/regulated fields (like ONGC’s Bassein field off the Mumbai coast) and free-market areas (such as the KG basin).Also, this will be the third increase in rates since April 2019 and comes on the back of firming benchmark international prices.Gas is an input for making fertiliser as well as generating electricity. It is also converted into CNG and piped to household kitchens for cooking purposes. A steep increase in prices is likely to reflect in higher rates for CNG and piped natural gas (PNG), which has in the last one year risen by over 70 per cent.The government sets the price of gas every six months — on April 1 and October 1 — each year based on rates prevalent in gas surplus nations such as the US, Canada and Russia in one year with a lag of one quarter.So, the price for October 1 to March 31 is based on the average price from July 2021 to June 2022. This is the period when global rates shot through the roof.As higher gas prices can potentially further fuel inflation, which has been stubbornly above the RBI’s comfort zone for the past eight months, the government has set up a committee to review the pricing formula.