The Indian Oil Ministry Readjusted the Prices for Natural Gas for June’24

The Oil Ministry of India has announced a revision in the domestic natural gas prices, setting it at USD 8.44 per million metric British thermal units (mmBtu) for June 2024, down from USD 8.90 mmBtu in May. Despite this announcement, the pricing mechanism adheres to a formula that caps the domestic natural gas price at USD 6.5 mmBtu for the month.

The situation regarding the domestic natural gas pricing in India involves a two-tiered approach. The pricing framework, which was recently modified, now incorporates a price range with a floor of USD 4 mmBtu and a ceiling of USD 6.5 mmBtu. This change aims to stabilize the fluctuations experienced due to the volatility in the global markets and is linked to imported crude oil prices, representing 10% of the Indian crude basket.

While the government has set the price at USD 8.44 per million metric British thermal units (mmBtu) for June 2024, a formula-based ceiling simultaneously caps the price at USD 6.5 per mmBtu for the same period. This means that despite the announced price adjustment from USD 8.90 in the previous month to USD 8.44, the maximum price that consumers will actually pay will not exceed USD 6.5 per mmBtu. This pricing mechanism is designed to protect consumers by preventing price surges that could result from volatile global market conditions, ensuring that domestic natural gas remains affordable.

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The revised pricing policy is applicable to natural gas produced from the conventional fields operated by major state-run enterprises, Oil and Natural Gas Corporation Ltd (ONGC) and Oil India Limited (OIL). The adjustments to the gas pricing formula come following recommendations from a government-appointed panel led by Kirit Parikh, a former member of NITI Aayog and an expert in energy policy, who proposed these changes to better shield domestic producers and consumers from international price instability.

This new pricing structure is reviewed and adjusted monthly, reflecting the government's ongoing efforts to manage energy resources more effectively and ensure a stable supply to the domestic market.