New Delhi: The government raises the price of natural gas produced from the domestic field of 62% to $ 2.9 per unit, a first increase in two years that will hit consumers by encouraging CNG and PNG costs but increasing earnings producers such as Reliance Industries Ltd, Cairn India and Run Ongc.
New gas prices will apply from Friday and CNG and PNG prices are likely to see a revised upward 10-11% in cities such as Delhi and Mumbai on Saturday or Sunday.
Higher gas prices will increase the burden on the user industry right when the economy recovers from the impact of the two deadly Covid-19 infections.
But even after revisions, CNG will maintain its benefits because it records the price of gasoline and diesel, which has begun to crawl back, according to the Prashant Vishes of the ICRA agency.
Cell Petroleum Planning and Analysis, Market Trackers of the Ministry of Oil that revise domestic gas prices on April 1 and October 1 each year according to the 2014 Formula, also raise the price of ceilings for gas produced from the KG-D6 RIL for 69% to $ 6.13 per Unit.
ICRA’s Sabyasachi Majumdar said the increase in gas prices would only provide limited assistance to producers because new prices were still not enough, in absolute requirements, to cover production costs.
Higher gas prices will increase the burden of subsidies for the government.
Every $ 1 per unit of increasing inundation prices where gas is supplied to fertilizer producers, subsidy requirements increase by around Rs 4,500-5,000 Crore.
The current budget allocation for fertilizer subsidies will prove inadequate, said ICRA.
This is the first increase in gas prices since April 2019 and has been driven by hardening benchmark rates in global hubs.
According to the vacation, the city gas network operator can raise the increase in CNG prices of 4.5-4.7 per kg and the PNG price of Rs 2.5-2.7 per unit.
This assumes the operator maintains their absolute margins.
For the electricity sector, more expensive domestic gas will lead to increased variables of generation costs around 40%, but the level of impact on consumers will be limited because the utilization is subdued 20-25% of plant-based power plant, said ICRA.