Cabinet approves new mechanism to fix pricing for domestic natural gas in India

The government has approved a new method to fix the price of natural gas. Natural gas produced from legacy old fields, known as APM gas, will now be linked to crude oil price instead of gas prices in surplus nations such as the US, Canada and Russia, Union Minister Anurag Thakur told reporters after a cabinet meeting today.

This will make piped natural gas (PNG) cheaper by 10 per cent and lower the cost of compressed natural gas (CNG) by 6 per cent to 9 per cent, oil secretary Pankaj Jain said today.

The government will issue a notification tomorrow to announce this change and the decision will come into force from Saturday.

“The price of such natural gas shall be 10 per cent of the monthly average of Indian Crude Basket and shall be notified on a monthly basis,” the government said in a statement, referring to India’s crude purchase and how much of it would be linked with fixing the price of natural gas.

India is targetting to increase the share of natural gas in the primary energy mix from the current 6.5 per cent to 15 per cent by 2030. The reforms will help expand the consumption of natural gas and will contribute to achievement of target of emission reduction and net zero, the government said in the statement released via the Press Information Bureau.

The Petroleum Ministry will issue a notification on Friday to implement the new domestic gas pricing guidelines approved by the Union Cabinet

Oil Minister Hardeep Puri tweeted the move will protect the interest of consumers.

“In continuation to various initiatives taken under the leadership of Prime Minister Narendra Modi to protect the interest of consumers by reducing the impact of increase in international gas prices on gas prices in India, the Union Cabinet approves revised domestic gas pricing guidelines,” Mr Puri said.

Currently, domestic gas prices are fixed every six months based on prices at four gas trading hubs – Henry Hub, Albena, National Balancing Point (Britain) and Russia.

The government said the pricing method based on the four gas hubs had a significant time lag and very high volatility, so the need for this reform was felt.

“The revised guidelines make prices linked to crude, which is a practice now followed in most industry contracts, is more relevant to our consumption basket and has deeper liquidity in global trading markets, on a real time basis,” the government said.
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