CNG & PNG may cost less as govt revises pricing formula

The Cabinet has announced a new pricing formula for PNG and CNG. This would effectively make both CNG and PNG cost less.

The government has put a cap on CNG and piped cooking gas which is expected to cut the cost by up to 10%. According to the revised pricing method, the natural gas produced from legacy or old fields, known as APM gas, will now be brought in par with the price of imported crude oil, rather than comparing it to the gas prices in four surplus countries like the U.S., Canada and Russia

According to a PTI report, APM gas will be priced at 10 per cent of the price of basket of crude oil that India imports (Indian basket of crude oil). However, the government has also placed a cap of $6.5 per million British thermal unit.. Similarly, a floor price of $4 per mmBtu has been placed. The cap announced is lower than the current rate which is at $8.57 per mmBtu.

Union Oil and Petroleum Minister, Hardeep Puri has said, "The new guidelines intend to ensure a stable pricing regime for domestic gas consumers". Puri also added that the reduction in prices will lower the fertilizer subsidy burden and help the domestic power sector.

Union Minister Anurag Thakur has said that the caps and the floor prices will be in place for 2 years and rates will increase by $0.25 per mmBtu per year thereafter.

Following a jump in the international energy prices, PNG and CNG saw a 80% hike in one year to August 2022. Once the pricing formula is implemented, the price of CNG would be reduced from Rs 79.56 per kg to Rs 73.59 in Delhi, and the price of PNG will drop from Rs 53.59 per thousand cubic metres to Rs 47.59. CNG will cost Rs 79 per kg in Mumbai as opposed to Rs 87, while PNG would cost Rs 49 per scm as opposed to Rs 54.