Union Cabinet Approves Revised Domestic Gas Pricing Guidelines; Check Benefits Here

New Delhi: The guidelines will be applicable to the gas produced from nomination fields of ONGC/OIL, new exploration license policy blocks (NELP) and pre-NELP blocks. The Narendra  Modi government on Thursday approved revised domestic gas pricing guidelines and the price of natural gas will be 10 percent of the monthly average of the Indian crude basket. Union Cabinet Approves Revised Domestic Gas Pricing Guidelines; Check Benefits Here.

Information and Broadcasting Minister Anurag Thakur, while addressing a press conference after a meeting of the union cabinet, said there will be monthly notification to ensure stable pricing in regime and provide adequate protection to producers from adverse market fluctuation. He said the guidelines will ensure a stable pricing regime for domestic gas consumers, provide adequate protection to producers from adverse market fluctuation and provide incentives for enhancing production.

The guidelines will be applicable to the gas produced from nomination fields of ONGC/OIL, new exploration license policy blocks (NELP) and pre-NELP blocks. The new guidelines will come into force from Saturday. According to the government, the reforms will lead to a significant decrease in prices of Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for transport. The reduced prices shall also lower the fertilizer subsidy burden and help the domestic power sector.

With the provision of a floor in gas prices as well as provision for 20% premium for new wells, this reform will incentivize ONGC and OIL to make additional long term investments in the upstream sector leading to greater production of natural gas and consequent reduction in import dependence of fossil fuels. The revised pricing guidelines will also promote a lower carbon footprint through the growth of a gas-based economy.

Currently, the domestic gas prices are determined as per the new Domestic Gas Pricing Guidelines, 2014 which were approved by Government in 2014. The 2014 pricing guidelines provided for declaration for domestic gas prices for a 6 month period based on the volume-weighted prices prevailing at four gas trading hubs – Henry Hub, Albena, National Balancing Point (UK), and Russia for a period of 12 months and a time lag of a quarter.

As the earlier guidelines based on 4 gas hubs had a significant time lag and very high volatility, the need for this rationalization and reform was felt. The revised guidelines make prices linked to crude, which is a practice now followed in most industry contracts, is more relevant to our consumption basket and has deeper liquidity in global trading markets, on a real time basis. With the changes now approved, data of Indian Crude basket price from the previous month would form the basis for APM gas price determination.

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