Free Press Journal

LNG price cut by 9%


New Delhi : In the first reduction of its kind, the rate for locally produced natural gas will be slashed by 9 per cent to $4.56 per unit from April 1, reflecting the softening in international prices.

This will be a bonanza for users in the power and fertilizer sector but a jolt for producers like Oil and Natural Gas Corp and Reliance Industries.

Gas explorers such as Reliance Industries Ltd. and BP Plc have long argued that higher domestic gas prices are

needed to spur investment and raise output. BP last year wrote off $770 million from an undersea Indian gas block, while Canada’s Niko Resources Ltd. is seeking to sell its stake in the project because of uncertainty about the long-term pricing outlook in India.

The previous UPA government had in 2013 approved a price formula suggested by a panel headed by C Rangarajan and it was supposed to be implemented from April 1, 2014, that would have doubled the gas prices. But before the gas rates could be notified, general elections were announced and Election Commission asked the then government to defer the decision till completion of polls.

The Narendra Modi government in October last year had approved the raising of the natural gas price by over 30 per cent to $5.61 per mmBtu, from $4.2 per unit. The new rates were effective from November 1 and supposed to be revised every six months. They were also supposed to incentivise investments.

The government does not fix or notify a rate for natural gas, according to industry sources. A formula was notified last year, based on which the price applicable from April 1 would be $4.56 per mmBtu on GCV basis.

Lower LNG prices would ease matters for gas-run power firms. CNG or domestic cooking gas prices are also expected to fall.

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