Government raises domestic natural gas prices in October

The government has announced an increase in domestic natural gas prices for the month of October, with the price per Metric Million British Thermal Unit (mmBtu) rising from $8.60 to $9.20. This decision, made by the Ministry of Petroleum and Natural Gas, marks the second consecutive month of price hikes and is expected to have repercussions for consumers, potentially leading to higher Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) prices.

Price hike for October

In September, the price of domestic natural gas had already risen from $7.85/mmBtu to $8.60/mmBtu. The latest increase to $9.20/mmBtu, as reported by CNBC Awaaz, signifies a continued upward trend in prices for the month of October.

Shift in pricing formula

A significant change in this pricing decision is the shift in the formula used to determine domestic natural gas prices. Previously, the pricing relied on the rates at four major global gas trading hubs: Henry Hub, Albany, National Balancing Point (UK), and Russian gas. However, the new formula now bases the pricing on the Indian Crude Basket's price from the previous month.

Committee's role

The government initiated a committee in October 2022 to devise this new pricing formula. The government's decision to adopt this formula stems from the committee's recommendations and represents an effort to ensure that domestic natural gas prices are more responsive to changing market dynamics.

Impact on consumers

While the shift in the pricing formula may lead to more transparent and agile pricing decisions, it also raises concerns about the potential burden on consumers due to rising gas prices. The impact of these increases will likely be felt by households and industries relying on natural gas for various applications.