Higher input costs push up PNG prices 20% this fiscal, 50 paise hike in NCR

IGL hikes price of domestic PNG in Delhi by 50 paise

Indraprastha Gas (IGL) has hiked the price of domestic piped natural gas (PNG) in Delhi by 50 paise to Rs 35.61 per unit (measured in standard cubic metres or scm).

The new price effective from Wednesday means more expensive cooking fuel for the nearly 1.68 million domestic households that use IGL’s PNG across the country.

This is the fifth hike in PNG prices by IGL in the current fiscal year, raising the price by over 20 per cent or Rs 5.95 per unit in this period. The present price would roughly mean an increase of Rs 92 per month in cooking gas bills from the levels during the 2020-21 financial year. It is estimated that a household consumes half a unit of PNG in a day.

Higher piped natural gas prices are due to increased input costs for IGL. In October 2021, the Centre had hiked the sale price allowed to domestically produced natural gas available under the administered price regime (APM) by 62 per cent to $2.9 per million British thermal units (mmBtu) from $1.79 per mmBtu.  Correspondingly, the ceiling price allowed to gas produced from deep water, ultra-deep water, and high pressure-high temperature areas (collectively called difficult fields) was almost doubled to $6.13 per mmBtu.

While the price of domestically available gas was hiked, there was also a surge in global natural gas prices, which is delivered as liquefied natural gas (LNG). The prices for LNG delivered to North Asia crossed $56 per mmBtu in October.

This surge in the price of spot LNG, which was scheduled to be delivered in December, was due to higher demand for LNG coming from Europe and colder winters being anticipated in Asia, putting pressure on the global supply chain.

Despite cooling off from record highs, Asian LNG prices remained firm and touched $48.3 per mmBtu in December. This price was for LNG due for delivery in February 2022.

These higher prices mean more pain in sight for the PNG consumers in India as IGL meets roughly 20 per cent of its natural gas requirement from LNG.

According to Debasish Mishra, leader (energy, resources, and industrials) at Deloitte in India, the higher PNG prices would mean tougher adoption over LPG cylinders.  “PNG consumers have been reluctantly switching from LPG given the initial deposit. As the running cost is expected to go up significantly in the future due to increased APM gas price and completely unaffordable spot prices unless mandated, it will be tough going for the PNG segment,” Mishra told Business Standard. 

Despite the higher price of PNG, it continues to be cheaper than domestic (14.2 kgs) LPG cylinders by around 25 per cent, according to official estimates. This is because LPG cylinder prices, too, have been higher after the government stopped bearing LPG subsidies from May 2020.  

The price of a domestic LPG cylinder has been unchanged at Rs 899.50 apiece from October 2021.