Cabinet approves gas pricing formula, PNG, CNG to cost 10% less

Union Cabinet has approved revised domestic gas pricing guidelines. Briefing media in New Delhi on Thursday night, Information and Broadcasting Minister Anurag Singh Thakur said, the price of natural gas is to be 10 per cent of the monthly average of Indian Crude Basket. He said that the move is to ensure stable pricing in regime and provide adequate protection to producers from adverse market fluctuation.The Minister also stated that it will provide incentives for enhancing production. The move will effectively reduce costs of piped natural gas (PNG) supplied to kitchens and compressed natural gas (CNG) for automobiles by up to 11% from Saturday. The Cabinet’s decision is based on the recommendations of an expert panel chaired by economist Kirit Parikh, which submitted its report on November 30, 2022, proposing a floor of $4 per unit and cap of $6.5 for natural gas produced from old APM fields operated by ONGC and OIL. 

#Cabinet approves revised domestic gas pricing guidelines

price of natural gas to be 10% of the monthly average of Indian Crude Basket, to be notified monthly

Move to ensure stable pricing in regime and provide adequate protection to producers from adverse market fluctuation pic.twitter.com/NRONPAOzzK

— Rajesh Malhotra (@DG_PIB) April 6, 2023

India is heavily dependent on import of energy. It imports over 85% of crude oil it processes and 55% of natural gas. It is in the interest of the country to also incentivise oil and gas producers to ramp up output from the domestic fields and make new discoveries, a government official said requesting anonymity. According to an oil ministry statement, the new pricing formula is also applicable to so-called New Exploration Licensing Policy (NELP) blocks and pre-NELP blocks, where production sharing contracts (PSCs) between the government and energy exporters allow for the government’s approval of prices. However, the floor and ceiling is applicable to only to gas produced by ONGC and OIL from nominated blocks.