GAS PRICE HIKES

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GAS PRICE HIKES 

CONTEXT:

  • The Petroleum Planning & Analysis Cell has set the price of domestic natural gas for May at $8.27 per metric million British thermal units. It was $7.92 in April.

WHERE DOES INDIA SOURCE ITS GAS FROM?

  • India imports around 55% of its natural gas requirement.
  • Qatar, UAE, US, Russia and Australia are among the top suppliers of liquified natural gas (LNG) to India.
  • India is also ramping up its own gas production.
  • In FY22, India’s LNG production was 33,131.23 million metric standard cubic metres.
  • About 83% of local LNG comes from state-run ONGC and OIL, from the ‘nomination’ regime, and the remaining from private/joint venture companies.
  • Nomination bocks were allocated to the state-run exploration companies before 1999 before the current auction process began for allocating oil and gas blocks.

IMPACT ON CONSUMERS:

  • The move is unlikely to affect consumers directly as gas from nomination fields has been kept unchanged at the ceiling price of $6.5 per mmBtu.
  • This ensures stable prices for consumers.
  • Gas from nomination fields is primarily used for piped natural gas (PNG) for cooking purposes and compressed natural gas (CNG) for vehicles.

IMPACT ON INDUSTRIES:

  • Steel, petrochemicals, fertilizers and power may be impacted by the increase in prices.
  • However, given that industrial consumption has only a small share of the domestic gas consumption basket, the increase in prices would have a limited impact on their input cost.
  • CNG makes for the major share of domestic gas consumption.
  • Steel and petrochemicals are among the non-priority sectors for supply of domestic gas.
  • Thus they would be supplied with gas only after requirements of the priority sectors are met.

WHY DOMESTIC GAS PRICES HAVE BEEN INCREASED?

  • The increase in the price of domestic natural gas has come on the back of the rise in crude oil prices in April.
  • Under the new pricing norms, the price of domestic natural gas has been linked to crude oil prices.
  • It is calculated at 10% of the monthly average of the Indian crude basket.
  • The average price of the Indian crude basket rose to $83.76 from $78.54 per barrel in March.
  • Oil prices rose last month after OPEC and its allies, including Russia, announced a surprise output cut of 1.16 million barrels per day, taking the benchmark Brent crude above the $85 per barrel-mark.

SYLLABUS: PRELIMS, INDIAN ECONOMY

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