Govt hikes domestic natural gas price to $9.20/mmBtu, new rate in effect from Oct 1

Price of domestic natural gas has been raised to $9.20 per metric million British thermal unit (mmBTu) from $8.60/mmBtu at present, the government said in a notification issued on September 30, adding that the new rates will come into effect from October 1.

The rate of $9.20/mmBTU will remain applicable for the entire period between October 1 and October 31, 2023, the notification issued by the Ministry of Petroleum and Natural Gas noted.

This marks the second month in a row when the price of natural gas been raised by the government. In September, the per mmBtu rate was increased from $7.85 to $8.60.

The hike is expected to affect end-consumers, as city gas distribution companies are likely to accordingly raise the prices of compressed natural gas (CNG) as well the piped natural gas (PNG), commonly referred to as the cooking gas.

Notably, the revision in natural gas prices is undertaken on per-month basis, as per the new formula adopted by the government. As per the formula, the price is determined on the basis of Indian crude basket rates of the preceding month.

This differs from the earlier method of arriving at a price after factoring the average price in the last one year of the world's four big gas trading hubs – National Balancing Point (UK), Russian Gas, Henry Hub and Albany.

The domestic rate, under this method, was fixed for a six-month period.

The old formula was discarded after the government had formed a committee in October last year to suggest a method of ascertaining the domestic prices. The committee, in its recommendations to the petroleum ministry, had proposed the new formula which relies on the Indian crude basket prices of the preceding month.