The formula-driven domestically produced natural gas prices were hiked by a steep 40 per cent to record levels of $8.57 per million British thermal units for six months from October, as global prices firmed up due to the ongoing Russia-Ukraine conflict.
The spike in the prices of natural gas would add to the inflationary pressure in the economy as it is used to generate electricity, make fertiliser and is converted into CNG to run automobiles.
However, it would increase the profits of exploration firms such as ONGC and Reliance Industries. This could trigger the Modi government to consider including natural gas production within the ambit of the windfall tax.
The rate paid for gas produced from old fields, which make up for about two-thirds of all gas produced in the country, was hiked to $8.57per million British thermal units from the current $6.1, according to an order from the oil ministry’s Petroleum Planning and Analysis Cell (PPAC).
The price of gas from difficult and newer fields like the ones in Reliance IndustriesLtd and its partner BP plc operated deepsea D6 block in KG basin, was hiked to $12.6 per mBtu from $9.92.
These are the highest rates for administered/regulated fields (like ONGC’s Bassein field off the Mumbai coast) and free-market areas (such as the KG basin).
