New method to price the natural gas has been approved by the government on Thursday. The natural gas which was being produced from the years old APM Gas, will now be linked to crude oil prices, which till now were affected by the prices of countries like Russia, US, Canada, said Union Minister Anurag Thakur.
Oil Secretary Pankaj Jain said, this new method will reduce the price of piped natural gas (PNG) by 10% and as a result of this the price for compressed natural gas (CNG) will also fall to 9% reducing by 6%.
This new development will be implemented from Saturday once after government issues its notification today.
Referring to the India’s purchase of crude oil the government said, “the price of such natural gas shall be 10 per cent of the monthly average of Indian Crude Basket and shall be notified on a monthly basis”.
India has set a target of increasing the share of natural gas by 8.5 to 15% in the primary energy mix by 2030. The present share of the natural gas stands at 6.5%.
A statement released by the PIB said, these changes will help in achieving the target of emission reduction and net zero as the suggested reform will help in increasing the consumption of natural gas.
Meanwhile, praising the move Oil Minister Hardeep Puri in his tweet said that the move will protect the interest of consumers.
“In continuation to various initiatives taken under the leadership of Prime Minister Narendra Modi to protect the interest of consumers by reducing the impact of increase in international gas prices on gas prices in India, the Union Cabinet approves revised domestic gas pricing guidelines,” said the Oil Minister.
At present, the prices of domestic gas are fixed in the duration of every six month according to the prices of four gas trading hubs – National Balancing Point (Britain), Henry Hub, Russia and Albena.
This pricing method based on the four trading hubs posses a time lag and very high volatility, hence the need for the reforms was felt, the government said.
“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,” government further said.