Lok Sabha Question No. 5487 (UNSTARRED), answered on 2025-04-03
Subject: Costs involved in the Production of Petroleum and Natural Gas
Ministry: PETROLEUM AND NATURAL GAS
Asked by: Dr. M K Vishnu Prasad

## LOK SABHA UNSTARRED QUESTION NO- 5487 TO BE ANSWERED ON- 03 rd  April, 2025

## COSTS INVOLVED IN THE PRODUCTION OF PETROLEUM AND NATURAL GAS

5487. Dr. M K Vishnu Prasad:

Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- a) the  costs  involved  in  the  production  of  petroleum  and  natural  gas  from  the  point  of extraction of crude oil in off-shore/other countries till it is sold to the consumers;
- b) the  steps  taken  by  the  Government  to  reduce  these  costs  so  as  to  reduce  the  costs  of  the products for the consumers; and
- c) the manner in which the Government has been successful in reducing such costs so far?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF PETROLEUM AND NATURAL GAS (SHRI SURESH GOPI)

(a) to (c) In the Oil & Gas industry various costs are involved till the sale of final products to the consumers.  From  the  point  of  extraction  these  inter-alia  include  cost  of  making  the  extracted commodity  merchantable,  cost  of  Importation/Transportation,  costs  of  refining,  marketing margins, statutory levies etc.

The Government / Oil and Gas Companies have implemented several measures to optimize fuel supply costs, focusing on efficiency improvements, logistical streamlining, and fiscal interventions.

Cost  reductions  have  been  achieved  through  technological  advancements  in  refining  and transportation.The rationalization of freight charges by PSU Oil Marketing Companies (OMCs) has significantly reduced transportation costs, narrowing the price gap between urban and remote areas.  The  expansion  of  the  City  Gas  Distribution  (CGD)  network  has  further  improved  fuel accessibility.

Government  also  took  several  other  steps  to  insulate  common  citizens  from  high  international prices, which included diversifying the crude import basket, invoking the provisions of Universal Service  Obligation  to  ensure  availability  of  petrol  &  diesel  in  domestic  market,  increasing  the blending of ethanol in petrol, etc.

Fiscal interventions, such as excise duty reductions in 2022 and strategic reductions in VAT by multiple states, have provided direct relief to consumers. Prices of petrol and diesel are market determined  and  Public  Sector  Oil  Marketing  Companies  (OMCs)  take  appropriate  decision  on pricing of petrol and diesel. In March, 2024, OMCs reduced the retail prices of petrol and diesel by Rs. 2 per litre each.

India has been the only major economy in the world where the prices of petrol and diesel have come  down  in  recent  years.  Changes  in  prices  of  petrol  and  diesel  in  some  major  economies between November 2021 and January 2025 are as under:

|               | %age Change in Prices between Nov-21 and Jan-25   | %age Change in Prices between Nov-21 and Jan-25   |
|---------------|---------------------------------------------------|---------------------------------------------------|
| Country       | Petrol                                            | Diesel                                            |
| India (Delhi) | -13.60%                                           | -10.92%                                           |
| France        | 14.21%                                            | 15.08%                                            |
| Germany       | 7.87%                                             | 12.43%                                            |
| Italy         | 8.65%                                             | 11.39%                                            |
| Spain         | 8.67%                                             | 12.93%                                            |
| UK            | 0.08%                                             | 2.61%                                             |
| Canada        | 10.52%                                            | 23.05%                                            |
| USA           | 4.83%                                             | 12.86%                                            |

Source: Petroleum Planning and Analysis Cell (PPAC)

Globally,  Pradhan  Mantri  Ujjwala  Yojana  (PMUY)  is  the  biggest  program  of  its  kind  that provides Domestic LPG to more than 100 million poor households at an effective price of just about Rs. 35/Kg. Further, the effective price of domestic LPG cylinder in neighbouring countries as on 01.01.2025 is as below:

| Country   | Domestic LPG (Rs./14.2 kg.cyl.)   |
|-----------|-----------------------------------|
| India     | 503.00*                           |
| Pakistan  | 1094.83                           |
| Sri Lanka | 1231.53                           |
| Nepal     | 1206.65                           |

Source: Petroleum Planning and Analysis Cell (PPAC)

*Effective cost to PMUY beneficiaries in Delhi, effective price is Rs. 803 for non-PMUY consumers

The price of Compressed Natural Gas (CNG) in any location is fixed by the City Gas Distribution (CGD)  entity  authorized  by  Petroleum  and  Natural  Gas  Regulatory  Board  (PNGRB)  after considering cost of gas procured, state taxes, tariff and other components.

In order to minimise the impact of rising Natural Gas prices,the Government has approved the revised  domestic  natural  gas  pricing  guidelines  vide  Gazette  Notification  dated  07.04.2023  for gas  produced  from  nomination  fields  of  Oil  and  Natural  Gas  Corporation  (ONGC)/  Oil  India Limited (OIL), New Exploration Licensing Policy (NELP) blocks, and pre-NELP blocks, where the Production Sharing Contracts (PSCs) provide for Government approval of prices. Under the revised guidelines, the price of such natural gas is determined as 10% of the monthly average of the Indian Crude Basket and is notified on a monthly basis. For gas produced by ONGC and OIL from their  nomination blocks,  the  Administered Price Mechanism  (APM)  price  is  subject to a floor  of  $4.0/Metric  Million  British  Thermal  Unit  (MMBTU)  and  a  ceiling  of  $6.5/MMBTU. This has led to price stability for consumers.

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