Natural Gas price may go up by 18% from April; India’s fuel demand rises 3.8% in February 2019

The price of natural gas may go up by as much as 18% from April 2019, according to a  CARE Ratings’ report.

As per the New Domestic Gas policy of 2014, which suggests revising natural gas prices every six months, the government may be revising domestic gas prices effective from 1 April 2019, according to the report. The prices of natural gas produced in deep water and high-pressure high temperature may also be revised.

“We believe the prices of domestic natural gas for the April 2019-September 2019 period will increase from the current $3.36/mmBtu to approximately, $3.97/mmBtu, resulting in an 18% increase,” said a report by CARE Ratings.

This rate hike might provide relief to upstream gas producers and help increase revenues for upstream gas exploration companies such as ONGC, OIL India, Vedanta, and Reliance, said the report.

However, at the same time, it would mean an increase in prices of compressed natural gas (used in auto fuel) and PNG (used in households as cooking gas) as it would lead to higher raw material cost affecting consumers adversely.

Meanwhile, India’s fuel demand rose 3.8% in February as free cooking gas connections spurred LPG consumption while petrol and diesel use continued to rise.

Fuel consumption in February totalled 17.41 million tonnes as compared to 16.77 million tonnes in the same month last year, data from the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry showed.

Consumption rose for the third month in a row as ensuing general elections are likely to spike demand further. With retail prices moderating, petrol consumption soared 8% to 2.25 million tonnes while the government push to give every household a cooking gas connection led to LPG demand spiking by 14.2% to 2.2 million tonnes.

Diesel, the most consumed fuel in the country, saw consumption rise by 2.7 per cent to 6.7 million tonnes. During February 2019, aviation turbine fuel (ATF) sales were up 10.5 per cent to 6,80,000 tonnes.

With the government pushing for use of cleaner liquefied petroleum gas (LPG) as cooking fuel by giving free connections to poor women, kerosene usage dropped 12% to 272,000 tonnes in February when compared to the year-ago period.

Naphtha sales were up by a steep 25.2% at 1.28 million tonnes as power demand soared, while consumption of petroleum coke dropped 15.3% to 1.58 million tonnes.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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