Prices of natural gas are likely to rise to record levels at the rate review scheduled this week. On October 1, 2022, The central Government-mandated price for domestic natural gas will be altered. After accounting for the recent spike in energy costs, the price paid for gas generated from old fields, such as those held by the state-owned Oil and Natural Gas Corporation (ONGC), is anticipated to increase to $9 per million British thermal units from the present $6.1.
The price of gas is determined by the government twice a year, on April 1 and October 1, and is based on rates that are common in countries with gas surpluses like the U.S., Canada, and Russia, which set their prices one year in advance and one quarter later.The cost between October 1 and March 31 is based on the cost between July 2021 and June 2022. During this time, international interest rates skyrocketed.
An order from the oil ministry has directed the group, headed by former planning commission member Kirit S. Parikh, to propose a “fair price to the end-consumer.”Up until March 2022, the rates predicted by this method were moderate and occasionally less than the cost of manufacturing, but they quickly increased after that, mirroring the rapid rise in rates experienced globally following Russia’s invasion of Ukraine.
The cost of gas from older fields, which is primarily produced by state-owned companies like ONGC and Oil India Ltd., had more than quadrupled to $6.1 per mmBtu as of April 1 and is now anticipated to reach $9 per mmBtu next month. The panel was tasked with recommending a reasonable price to end users as well as a “market-oriented, transparent and dependable pricing regime for India’s long-term strategy for securing a gas-based economy,” according to the directive.