Centre hikes domestic natural gas prices from today. What does it mean for common man?

The central government on Saturday raised the domestic natural gas prices from $8.60 per metric million.

British thermal unit (mmBtu) to $9.20 per mmBtu, according to the notification issued by the ministry of petroleum and natural gas. The new rates will come into effect from Sunday, October 1.

The revised prices will be applicable between October 1 and October 31. The Centre has hiked the prices of domestic natural gas for the second month in a row. In September, the per mmBtu price was increased from $7.85 to $8.60.

This price revision is expected to affect the consumers, as gas distribution companies are likely to raise the prices of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG).

As per the new formula adopted by the government, the price of domestic natural gas is now decided on the basis of the price of Indian crude basket per month. Earlier, the prices of four big gas trading hubs of the world – Henry Hub, Albany, National Balancing Point (UK) and Russian gas used to determine the domestic gas prices. The domestic rate, under this method, was fixed for a six-month period.

Live Mint reported that in the new method, the price is determined on the basis of Indian crude basket rates of the preceding month, while under the old formula, the average of the price of the last year (value weighted price) of the four gas trading hubs was calculated and was implemented.

The old formula was dropped after the Centre had formed a committee last year to suggest a method of ascertaining the domestic gas prices. The committee had proposed the new formula which relies on the Indian crude basket prices of the preceding month.