The Indian government has announced a hike in domestic natural gas prices for the month of May, from $7.92 per Metric Million British Thermal Unit (MMBtu) to $8.27 per MMBtu. However, the final rates for domestic, commercial, and industrial consumers of natural gas will remain capped at $6.5 per MMBtu, and there will be no change in the retail price of piped natural gas (PNG) for households and compressed natural gas (CNG) used as an automobile fuel.

The new gas prices are based on a new formula that pegs gas prices at 10% of the international price of the Indian crude basket. This new formula was implemented in early April, in line with recommendations made by the Kirit Parikh committee on gas pricing. One of the key changes was to cap the rates for final consumers at $6.5 per MMBtu.

Additionally, the government has approved a floor price of $4 per MMBtu for the next two years to cover the cost of gas production by state-run firms ONGC Ltd and OIL Ltd, with the ceiling price set at $6.5 per MMBtu. The floor and ceiling prices will be increased by approximately $0.5 per MMBtu annually after the two-year period.

ONGC Ltd and OIL Ltd produce 83.3% of India’s natural gas, while the remaining 16.7% is produced by private companies and joint venture entities. The rate for gas extracted from newer sources, such as the one operated by Reliance Industries and its partner BP in the KG Basin, has been cut marginally to $12.12 per MMBtu.

In an unrelated move, state-run oil marketing companies have also reduced the price of 19-kg commercial LPG cylinders by Rs 171.50 per unit with immediate effect. Commercial LPG cylinders will now retail at Rs 1856.50 in Delhi, following a second straight price cut in as many months. However, prices remain higher than they were in February, after OMCs hiked prices by Rs 350.50 per unit on March 1. The prices of domestic LPG cylinders, meanwhile, remain unchanged, having last risen by Rs 50 per unit on March 1.

The changes to natural gas prices and LPG (Liquefied petroleum gas) cylinder prices are part of the Indian government’s efforts to balance the interests of both producers and consumers, ensuring that prices remain competitive while still providing a reasonable return for producers. The government has said that it will continue to monitor prices and make changes as necessary to ensure that the natural gas and LPG markets remain stable and accessible for all.