Gas prices will haunt for 6 more months, 7 times increase in international prices

Newz Fast, New Delhi: Domestic gas prices have reached a high level due to a seven-fold increase in the international prices of liquefied natural gas in the last two years. This rise in gas prices is likely to continue for the next six months.

If this happens, the burden on industrial customers, domestic consumers and the central government will increase significantly. India imports 45 to 50 percent of its gas requirement every month. At the same time, European countries are picking up gas from the market by bidding fast from other countries to meet their gas demand.

Gas prices increased three times

The price of gas from old and established gas fields dominated by public sector oil companies has nearly tripled from a year ago to $8.57 per mmBtu (million metric British thermal unit).

At the same time, the maximum gas price in more difficult deep-water areas such as Reliance's KG-D6 basin has doubled to $12.46 per mmBtu in a year.

Europe's gas crisis is a threat to the world

The government controls the gas prices and revises them every six months. There was a sharp jump in demand for gas after the lockdown opened in mid-2021. After this, gas supplies to Europe are being disrupted due to the Ukraine war earlier this year.

Sensing Europe's gas crisis, the International Monetary Fund's gas price index has risen 72 per cent this year.

According to the gas futures contracts, it is expected that the gas prices will remain at higher levels till February 2023. In the meantime, if a solution to the war is not found, then the prices may continue to rise even further.

Economics of gas

According to government data, domestic gas production in August this year was 2896 million standard cubic meters, which is one per cent lower than last August. The increase in global prices has had a major impact on imports.

India imported 2369 million standard cubic meters of gas in August, a decline of 19 per cent over the previous year. India imports 45 to 50 percent of its gas requirement every month.

At the same time, European countries are picking up gas from the market by bidding fast from other countries to meet their gas demand.

Sharp increase in subsidies

Natural gas is an essential product for the fertilizer industry and ammonia is made from it. Although other fuels can also be used but they are very expensive.

With the increase in the price of gas, the cost of production is increasing. Due to this there has also been a sharp increase in the subsidy given by the central government.

From April to August this year, fertilizer subsidy of about Rs 1.21 trillion was given, which is 32 per cent more than last year. In view of the rise in gas prices, the government is considering imposing windfall tax on the gas sector as well.

Pressure on household budget

The burden on those who use gas in their homes and vehicles has increased significantly. The number of PNG connections in households has increased by 14 per cent so far this year.

The number of CNG stations in the country has increased by 28.5 per cent to 4667 during the same period. While PNG prices have increased by 40 to 42 per cent in Delhi, it has increased by 21 to 23 per cent in Mumbai.