The government has reduced the price of natural gas after two years, and this gas is used to make CNG (Compressed Natural Gas) and PNG (Piped Natural Gas). This decision will bring relief to millions of consumers who are struggling with ever-rising inflation.

According to the media, the price of natural gas produced from fields allocated to ONGC (Oil and Natural Gas Corporation) without auction has been reduced from $6.75 per million British thermal units (MMBTU) to $6.41. This reduction has happened for the first time since the government implemented a new formula to fix the price of such gas in April 2023.

How much reduction is possible in the prices of PNG and CNG

Experts estimate that the price of natural gas has come down by about 5%. However, gas distributor companies cannot pass on the benefit of this entire reduction directly to the consumers, as they are already grappling with the pressures arising from the increase in input costs.

Estimated cut

Still, CNG and PNG prices may see a fall of up to 3%. This means that CNG prices are expected to come down by ₹ 2 to ₹ 3, which will reduce your vehicle running cost. At the same time, PNG used in homes will also be cheaper, which will give relief to the kitchen budget.

Relief to distributor companies

The reduction in the price of natural gas will also provide great relief to companies like Indraprastha Gas Limited, Mahanagar Gas Limited, and Adani-Total Gas Limited, which were under pressure due to rising input costs.

New formula for natural gas pricing

Let us tell you, in April 2023, the Central Government accepted the report of an expert committee, which recommended fixing the price of gas from legacy fields at 10 percent of the monthly average import price of crude oil every month.

Pricing Basis

This formula had a minimum cap of $4 per MMBTU and a maximum cap of $6.5 per MMBTU.

International market impact

Crude oil prices have fallen in the international market. Indian crude oil prices averaged around $64 per barrel in May. Using this benchmark, the price of natural gas came out to be $6.41 per MMBTU, which is lower than the earlier price. This direct relationship translates into lower prices for consumers.