The Financial Express: Killing the Gas Fields

Only a small fraction of India’s domestic natural gas (DNG) is consumed by the end-users for vehicles or cooking. In both the cases, it is a replacement-fuel—for petrol, diesel or LPG, all fuels that are much more expensive. A switch-over, even at RLNG prices, will therefore lead to big savings for the consumer. Intermediary industries, such as chemicals, fertilisers and power—remain the major consumers of DNG. The gas is used either as a raw material for constituent molecules or as a fuel. Thus, despite being essentially an industrial product (in India), DNG and its price tend to occupy the mindscape across a wide spectrum of the society.

Petrol and diesel have been freed from government pricing. In the case of DNG, the government has moved in the reverse direction. An item produced in a contractual, free-market regime has been brought under administered pricing and allocation. The current pricing regime originates from the government notification of October 2014. This, inter alia, makes the biannual price announcements. Price for the next six months is to be based on a weighted average of Henry Hub (US) price, Alberta Hub Price and Russian FTS price for various destinations, besides NBP. The figures used for calculations shall be from the previous six months. Unlike India, the first three prices are from gas-surplus (even gas-flaring) markets. MORE