Natural Gas Prices in India Climb to Record Levels: Key Questions Answered

With the change in pricing norms pushing rates to an all-time high, here's why it matters.

Natural gas prices in India have been raised by more than 40 percent, according to an order issued on Friday, 30 September, by the Petroleum Planning and Analysis Cell (PPAC), which functions under the Ministry of Petroleum and Natural Gas.

This steep hike comes after Economic Times reported that the government is not looking to hike natural gas prices in an effort to manage inflation.

With the change in pricing norm pushing rates to an all-time high, here's why it matters:

What are the new rates of natural gas? When will they be revised again?

There is no one single price for a unit of natural gas as it varies based on the source. Natural gas that has been extracted from oil fields is now set to cost $8.57 per million British thermal unit (mmBtu), a jump from the earlier rate of $6.1/mmBtu.

The cost of domestic natural gas is nearly double the rate at which it used to be sold – from $2.90 per mmBtu to $6.10 per million mmBtu. Finally, the natural gas produced in deepwater, ultra deepwater, and high pressure-high temperature areas has been raised to $12.6 per mmBtu from $9.92 per mmBtu.

Natural gas prices are revised every six months, hence the current rates are applicable starting 1 October 2022 to 31 March 2022.  

Why have the prices been hiked? How many times has this happened before?

Going back to April 2019, this is the third time in a row that the prices of natural gas for a six-month period has been increased. According to the government, the upward trend of natural gas price is a result of the strengthening of energy prices in the global market. But what’s actually driving them up? Factors that can be traced back to the end of global COVID-19 restrictions and the Russia-Ukraine war are to blame. 

Whom will it affect and how?

Major cities in India like Delhi and Mumbai are set to witness a sharp rise in the prices of Compressed Natural Gas (CNG) and Piped Cooking Gas. Natural gas is also used for the generation of electricity, yet reports note that the impact on the daily expenses of common people will be minimal.

In other good news, farmers who rely on fertilisers that are made using natural gas may also not have to fully bear the brunt owing to the government's fertiliser subsidies.

Is natural gas good or bad for the environment?

Well, natural gas is technically a fossil fuel. This means that it is not a renewable source of energy. However, it produces lesser greenhouse gas (GHG) emissions than coal. It is because of this dichotomous nature that natural gas has been dubbed as a 'transition fuel.'

This is especially true for countries in Asia and Africa which have pledged to move towards a fully renewable energy-based economy but lack the capacity and resources to make the switch quickly.