On the back of rising global crude oil and natural gas rates, analysts expect the price of domestic gas to increase by a sharp 128% for the April-September period of the next financial year. This could inflate CNG prices and make piped natural gas costlier for households, hotels and restaurants. Power and fertiliser companies, which use gas as fuel and feedstock respectively, may also feel the pinch.
Analysts at Jefferies estimate that the domestic gas price ceiling fixed by the government will increase from the current level of $3.2/mBtu (on net calorific value basis) to $7.3/mBtu for April-September 2022 and $8.2/mBtu for the subsequent six months.
The Union government, in September, 2021, had raised the price of domestically produced gas by 62% to $2.90 per million British thermal units (mBtu) as lower production amid higher demand increased North American and European gas prices. The ceiling price for gas to be produced from difficult fields — which have higher pricing and marketing freedom — had been raised by 69% to $6.13/mBtu.
These prices are on the gross calorific value basis. Domestic gas price is linked to the weighted average price of four global benchmarks (US, UK, Canada and Russia).