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CNG prices likely to rise 12-14% in Oct

Our Bureau New Delhi | Updated on September 17, 2018 Published on September 17, 2018

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From October 1, domestically produced natural gas is set to cost more — its second steepest hike since the implementation of the New Domestic Gas policy, 2014.

According to industry watchers, the price, which is revised every six months, will see an increase of 12-14 per cent from the current $3.06 per million British thermal units (mBtu) for the second half of FY19.

Higher global crude oil and natural gas prices is seen to drive up the price at which domestically produced gas is sold in the country.

“We believe the prices of domestic natural gas for the October 2018-March 2019 period will increase from the current $3.06/mBtu to approximately $3.43/mBtu,” said CARE Ratings in a note. The hike in natural gas price will push up the cost of compressed natural gas (CNG) and piped natural gas (PNG), it added.

 

 

 

In the April 2018 revision, the price of natural gas was hiked by 5.9 per cent to $3.06 per mBtu from $2.89. Correspondingly, Indraprastha Gas Ltd (IGL) announced a ₹0.90 per kg increase in CNG price and ₹1.15 per scm increase in PNG price in Delhi. CNG retailed at ₹40.61 per kg and PNG at ₹27.14 per scm in Delhi post rate hike.

This time around, the price hike is expected to be steeper, as the rupee has depreciated considerably from the earlier levels. While announcing an untimely price revision on September 1, IGL had said: “There has been a steep appreciation of the dollar as compared to the rupee since the last price revision. The base price of natural gas being procured by IGL from all its sources is dollar-linked, thereby making the entire input price totally dependent on the price of dollar vis-à-vis the rupee.”

From the beginning of this month till today, IGL has already hikes the price of CNG and PNG in Delhi to ₹42.60 per kg (up ₹0.63) and ₹28.25 per scm (up ₹1.11), respectively.

A higher gas price affects the margins of the power and sponge iron industries, among others.

“This is the highest price registered for maximum spot power price in eight years,” Rajesh Mendiratta, Director, IEX, Power & RE Markets and Policy & Regulations, told BusinessLine. “The higher levels were (earlier) registered in 2009, when the prices reached ₹17 a unit. By our assessment, the demand is higher from households and industries. There is also a noticeably higher demand from the southern States.

“The price hike is driven by a dip in power generation from hydro and wind sources and constraints in coal supply, and of course increased demand.”

Published on September 17, 2018
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