Starting April 1, domestically produced gas will be sold at two different prices.

The locally produced gas will be almost 20 per cent cheaper at $3.06 per million British thermal unit on a gross calorific value basis for six months.

Simultaneously, the government also announced the price cap of $6.61 per mBtu on a gross calorific value basis for natural gas from deepwater, ultra deepwater and high temperature high pressure areas.

Price ceiling The price ceiling will be applicable from April-September 2016 before it is revised again.

If the 20 per cent drop in prices is passed onto consumers, it would result in cheaper electricity bills as well as lower rates for piped cooking gas and compressed natural gas (used for transportation.

Every dollar change in gas price impacts the CNG price by about ₹3 a kg, piped natural gas rates by around ₹2 per standard cubic metre and the electricity tariff by 45-50 paise a unit. For the government, on the one side it means lower subsidy payout for the fertiliser sectors and on the other, reduced earnings from royalty and cess given by hydrocarbon exploration and production companies.

In the September 2015-March 2016 period the price of domestic natural gas was $3.82 per mBtu on a gross calorific value basis.

Pricing freedom Earlier in March, the government approved pricing and marketing freedom for natural gas produced from such difficult areas.

However, the pricing freedom is subject to a price cap which is determined by the lowest among landed cost of imported fuel oil, weighted average of imported fuel oil, imported coal and imported LNG or the landed cost of imported LNG.

The domestic natural gas price is as per a formula approved by the government in September 2014. Since the formula for deriving a natural gas price was approved, prices have only seen a cut in all the three price revisions.

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