Gas prices to be linked with global indices
This proposal comes in the backdrop of the recent controversy between RIL and Reliance Natural Resources over their gas deal from the Krishna Godavari gas fields.
By Soma Banerjee, TNN |
NEW DELHI: GAS prices in India are about to witness something different. For a cold winter in the US or a high demand for LNG in Japan may lead to higher gas prices or hiked power tariffs for the Indian consumers. Director general of Hydrocarbons, the upstream regulator in the country, has proposed gas prices in the country to be linked to global indexes like Henry Hub in the US, LNG or naphtha. The proposal calls for a floor price, linked to global prices like crude oil, for all new gas contracts which would have to be competitively bid.
This proposal comes in the backdrop of the recent controversy between RIL and Reliance Natural Resources over their gas deal from the Krishna Godavari gas fields.
At present, gas prices in India sell at much lower prices than global markets. Linking domestic gas prices to global prices would translate to sharp increases by almost $5 to $ 6 per million metric British thermal unit (mmbtu). Although, crude oil has been linked to global prices and refineries have to buy oil at international prices, linking gas prices to global rates is only possible if the consumer industry can pass on the price to the end product. Power tariffs or fertiliser prices, where the price of gas is an input cost is highly subsidised and controlled and any major shifts in the pricing will impact these industries.
This proposal comes in the backdrop of the recent controversy between RIL and Reliance Natural Resources over their gas deal from the Krishna Godavari gas fields.
At present, gas prices in India sell at much lower prices than global markets. Linking domestic gas prices to global prices would translate to sharp increases by almost $5 to $ 6 per million metric British thermal unit (mmbtu). Although, crude oil has been linked to global prices and refineries have to buy oil at international prices, linking gas prices to global rates is only possible if the consumer industry can pass on the price to the end product. Power tariffs or fertiliser prices, where the price of gas is an input cost is highly subsidised and controlled and any major shifts in the pricing will impact these industries.
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