India changes gas pricing formula, caps rates

In order to prevent runaway rates, the Indian government has adopted a new natural gas pricing formula that includes a price cap on compressed natural gas (CNG) and piped cooking gas. Beginning on April 1, a new formula will link the cost of natural gas produced from historic or old fields, or APM gas, to the cost of crude oil imported by India. This represents a departure from the earlier practice of basing the price on the cost of gas in countries with surpluses like the US, Canada, and Russia. Anurag Thakur, the Union I&B Minister, made the announcement on Thursday following a Cabinet meeting.

NewsOTG gathered that APM gas will be charged 10% of the cost of the Indian basket of crude oil, commonly known as the basket of crude oil that India buys, under the new pricing scheme. Though cheaper than the present price of USD 8.57 per mmBtu, the price will be limited to USD 6.5 for every million British thermal units. A floor price of $4 per mmBtu is now included in the new pricing methodology.

In addition to the price adjustments, the government has also decided to shift the former biannual modification of natural gas rates to a monthly revision. The price of natural gas is anticipated to become more stable as a result of this action. Concerns over India’s soaring fuel prices prompted the decision to regulate natural gas pricing. The Indian government is searching for methods to lessen the burden on consumers as the price of crude oil is rising. Consumers who have been struggling with increased fuel prices in recent months might feel some comfort as a result of this action.

Furthermore anticipated to gain from the new pricing scheme are gas producers in India. Producers will be able to increase their profits by tying the price of APM gas to crude oil prices. In consequence, this is anticipated to spur additional investment in the industry and raise domestic natural gas production. Overall, it is anticipated that the Indian government’s move to change the natural gas price formula will benefit the economy of the nation. Businesses and consumers will both benefit from lower costs and greater availability of natural gas with more predictable and inexpensive natural gas pricing.