Natural gas prices set to increase by 18% from next month

New Delhi: The price of domestically generated natural gas might possibly climb up during April-September period; although the rate would still be less than US$ 4 a unit. The price rise will result in a surge in prices of liquefied petroleum gas (LPG) and compressed natural gas (CNG) used as transportation fuel.

The next revision (for April-September) will increase the price by 18 percent maximum from the current price of US$ 3.36 a unit, according to analysts. Based on a formula approved by the government, domestically produced gas rate is revised bi-annually.

Domestic gas price to rise by 7-9% in next revision

The next revision is likely to raise the domestic gas price by 7-9 percent to US$ 3.62-3.67 per mBtu (million British thermal units), says Crisil Research. On the other hand, spot LNG rates to be in the range of US$ 6.5-7 per mBtu in the first half of the next financial year, Crisil Research estimates.

"We believe the prices of domestic natural gas for the April-September 2019 period will increase from the current US$ 3.36 a mBtu to approximately US$ 3.97 a mBtu, resulting in an 18 percent increase,"

"This increase is expected to be fully passed on to end-consumers, making CNG and household PNG dearer. CNG prices are expected to increase by Rs 1.5 to Rs 2 per kg in Mumbai and Rs 1.7-2.2 per kg in Gujarat – amounting to a 3-4 percent increase over current prices. In the household PNG segment, an increase of 2-2.5 percent is expected," CRISIL Research said.

CARE Ratings is a projecting steeper hike, as Crisil is still conservative in its estimates. "We believe the prices of domestic natural gas for the April-September 2019 period will increase from the current US$ 3.36 a mBtu to approximately US$ 3.97 a mBtu, resulting in an 18 percent increase," Care Ratings said.