The prices of essential commodities of daily life are increasing day by day. Various essential commodities including petrol, diesel and LPG are becoming expensive, while now the prices of CNG and PNG can also increase. Then let’s know why ..
Why can CNG price increase?
The government has increased the price of natural gas produced from old areas by 4 percent under the administered pricing system (APM). The gas produced from these areas is the main raw material for the production of CNG, electricity and fertilizers. In such a situation, CNG prices can also increase due to increase in the price of APM gas.
APM price increase
The notification issued by the Petroleum Scheme and Analysis Cell (PPAC) under the Ministry of Petroleum states that from April 1, the price of APM gas has been increased from $ 6.50 per unit (MMBTU) to $ 6.75 per unit. APM gas is produced from the state -owned oil companies Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) from them from the specified areas. The gas produced from these areas is used as raw materials to make piped cooking gas (PNG), as well as CNG for driving vehicles, fertilizers and power generation. This is the first increase in APM gas prices in two years. This is according to the outline of the government.
How are prices determined?
The Union Cabinet has accepted the report of an expert committee to decide the bulk price of domestically produced natural gas at 10 percent of the monthly average import price of crude oil in April 2023. In which the British Thermal Unit (MMBTU) per million was fixed at four dollars and the maximum limit of $ 6.5. Along with this, the government changed its recommendation of an annual increase of $ 0.50 per unit in 2027 by full regulation. The cabinet decided that there will be no change in the rates for two years and
Prices will be valid for one year.
The Petroleum Planning and Analysis Cell (PPAC) said that the price of APM gas from 1 April to 30 April 2025 should be 10 percent indicators on crude oil prices, $ 7.26 per unit based on the effect of inflation. But this price was subject to a limit. The price limit has been increased from $ 6.50 to $ 6.75 per unit. The limit will be effective from April 2025 to March 2026 and will increase by $ 0.25 per unit in April next year.
On what basis is the first price determined?
Prior to April 2023, the price of gas produced from areas under APM system was determined on a semi-yearly basis based on a formula. The decision was taken under average international prices based on average international prices at four gas trade centers. APM gas contributes 70 percent to total domestic gas production. APM gas is supplied to deliver CNG and piped cooking gas to homes to urban gas distributors. This is 60 percent of their sales. After the April 2023 decision, APM gas prices will be amended on a monthly basis, but they will be subject to maximum and minimum prices. Now the maximum value is 6.75 US dollars per unit.
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