Sharp rise expected in CNG, PNG prices
Higher gas prices would put more pressure on user industries at a time when the economy is still reeling from the second wave of deadly Covid-19.
The government increased the price of natural gas produced in domestic fields by 62% to $2.9 per unit. The hike will hurt consumers by driving up the cost of CNG and PNG. However, it will boost revenue for producers like Reliance Industries Ltd, Cairn India, and the state-run ONGC.
The new gas price will be in effect from Friday, and CNG and PNG prices in cities like Delhi and Mumbai are expected to rise by 10-11% on Saturday or Sunday, according to a report in The Times of India. Higher gas prices would put more pressure on user industries at a time when the economy is still reeling from the second wave of deadly Covid-19.
According to Prashant Vasisht of rating agency ICRA, CNG would keep its advantage even after the modification because of record gasoline and diesel prices, which have begun to creep up again.
The oil ministry’s market tracker, the Petroleum Planning and Analysis Cell, increased the ceiling price for gas produced from tough fields such as RIL’s KG-D6 block by 69% to $6.13 per unit on April 1 and October 1 every year, as per a 2014 formula.
According to Sabyasachi Majumdar of ICRA, the increase in gas prices will only provide a limited respite to producers because the higher price is still insufficient to cover the cost of production in absolute terms.
Gas prices have risen for the first time since April 2019, owing to a hardening of benchmark rates at global hubs. During the previous two years, prices had fallen.
Operators of city gas networks, according to Vasisht, could hike CNG prices by Rs 4.5-4.7 per kg and PNG prices by Rs 2.5-2.7 per unit, given that the operators’ absolute margins are maintained.