Consumers look set to pay more for CNG & LPG, from next month as the benchmark price for natural gas produced in domestic fields is expected to hit a two year high during the half yearly revision due on April 1.
According to Government sources the benchmark price is expected to rise to $3.06 per unit from $2.89 at present. This will be the highest price since the gas price was $3.82 for the six months ending March 2016.
Power tariffs will be almost immune to the rise in prices as only 8% of total electricity comes from gas-fired plant, while the revision will raise the cost of manufacturing urea, which uses domestic gas as feedstock just like companies providing CNG and LPG services.
For producers such as Reliance Industries from the private sector as well as state run ONGC, the price rise will shore up their fortunes for sure, at a time when they are altogether investing more than $10 billion into new gas fields.
Back of the envelope calculations indicate that at the current volume of production, state run ONGC’s annual revenue will go up to Rs 4,100 crore and post-tax profit will rise by 2,700 crore on every dollar increase in domestic gas prices.
Under the new pricing regime introduced by the NDA government, gas prices are to be revised on a 6 monthly basis, based on the average rates of gas-surplus markets like the US, Russia and Canada.
The benchmark price was raised for the first time in nearly 3 years to $2.89 per unit in October last year after five rounds of reductions.
With elections coming up in 2019, it is time that the NDA government take suitable measures to stabilize gas prices or else be ready to face the consequences in the Union elections.
