The hike in the prices of domestically produced gas by 62 per cent over the April-September 2021 price of USD 1.79 per mmBtu has now put the price of gas at USD 2.90. The new price will be applicable for the coming six months starting from October 1. At the same time, the price ceiling on the gas produced from difficult fields such as Deepsea would be USD 6.13 per mmBtu, up from USD 3.62. It is important to understand that price revision of domestic gas is a routine activity. The Central government sets the price for natural gas every six months at the start of April and October in accordance with the weighted average price of the four benchmark countries — the United States of America, the United Kingdom, Russia and Canada. The prices of natural gas were last raised in April 2019 and had fallen ever since to USD 1.79 mmBtu and remained stagnant over the past periods. The hike in the prices of gas can be considered imperative. First of all, it is expected to enhance the profitability of India's state-run power companies, Oil and Natural Gas Corporation (ONGC) in particular. The corporation, despite producing 80 per cent of India's domestic gas, has not been in very good shape in terms of recoveries. It is estimated that a USD 1 increase in domestic oil prices could boost the revenue of ONGC by Rs 5,200 crore on a yearly basis. However, the ONGC will not be the sole gainer. Reliance industries is also likely to make a profit from the revised gas prices. The newly introduced ceiling of USD 6.13 per mmBtu is well above the recent price discovery for gas from the Krishna Godavari basin block, as conducted by Reliance-BP. Notably, the production of gas by Reliance industries is on the rise in Deepsea fields. The new capping will further boost production. Apart from the gainers, there may be potential losers as well in the process. The hike in gas prices is most likely to hit consumers hard. If we broadly break up the consumers into wholesale and end consumers, the impact of the government's move will be quite clear. The most prominent consumers of natural gas are City Gas Distributors who procure nearly 66 per cent of the overall natural gas which they would supply to end consumers. So, the cost of increased prices will be borne by CGDs and the end consumer. The proportion of marginal costs for both entities will depend upon the retail prices set by the CDGs after securing their profit margins. Thus, the increase in gas prices is likely to hit the end consumers the most, who are already grappling with fuel price hikes. Petrol prices were again hiked by 25 paise and diesel prices by 30 paise on Friday — taking the prices to a record level once again in Delhi and Mumbai. The practical utility of natural gas comes in various forms including manufacturing CNG for automobiles and production of fertilizers and electricity. The price hike will also affect the prospect of these processes. As the CNG is conceived as an alternative to fossil fuels, the increased prices may affect its demand to a certain extent. Still, it is estimated that CNG prices will remain 35 per cent cheaper than fossil fuels. Also, the impact on electricity production and prices may be minuscule as natural gas, as of now, is not that significant a source of electricity production. The major evaluation that needs to be made at this point in time is the potential impact of the move on the environment and clean energy. While initially, the price hike may disincentivize the use of natural gas for various applications, hampering the prospects of clean energy, in the long run, increased production may normalize the trend and boost the use of CNG as an alternative fuel. To sum up, the hike in domestic gas prices could be considered as an imperative step. It also has its likely fallouts and possible advantages. The governments' role of monitoring, evaluation and regulation becomes very crucial at this juncture to ensure positive outcomes rather than negative. The government must also look forward to easing off the burden on the common man's pocket by revising duty on other fuels.