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The hike in domestic natural gas price has come as a positive for gas explorers such as ONGC, but has hit the fertiliser, power, and city gas distribution (auto fuel as well as piped cooking fuel) sectors.
According to analysts, the users are expected to pass on the hike to consumers resulting in a spike in electricity as well as CNG and PNG prices.
The Ministry of Petroleum and Natural Gas has raised the sale price of domestically produced natural gas to $2.89 per million British thermal units (mmBtu) for the six-month period starting October 1 in tandem with the global prices. The price ceiling for gas produced from deep-water, ultra-deep water and high pressure-high temperature fields was also raised to $6.30 per mmBtu.
This revised price of natural gas is higher than the $2.48 per mmBtu price during the April-September 2017 period. The price of gas from deep-water, ultra-deep water and high pressure-high temperature fields was $5.56 per mmBtu for the same period. On Monday, Indraprastha Gas Ltd, a key player in PNG and CNG segment, hiked retail CNG prices in Delhi by 95 paise a kg to ₹39.71 a kg and by ₹1.26 per kg in Noida, Greater Noida and Ghaziabad to ₹49.20 a kg.
The consumer price of PNG to the households in Delhi was hiked by 80 paise per scm (Standard Cubic Metre) to ₹25.99 per scm, while the price in Noida, Greater Noida and Ghaziabad was hiked by 91 paise per scm to ₹27.64 per scm.
For fertiliser companies, the hike will be revenue neutral as government’s subsidy for fertilisers will absorb the rise and prevent a surge of input cost for farmers. “There will only be the need for more working capital,” an official at a Fertiliser Assocciation of India said.
“Since fertiliser companies pool natural gas, the effective impact on them of the hike in domestic gas price will be to the tune of 35 cent per mmBtu. This will lead to an increase of ₹ 1000 crore in the government’s subsidy outgo for the second half of the financial year,” said K Ravichandran, Senior Vice-President at ICRA.
Gas based power plants will continue to be under pressure due to low off-take and now a higher input cost. Ravichandran said, “Cost of power generation from NTPC’s gas based power plants will be 18 paisa per unit because of the raise in domestic gas price.”
The impact on NTPC’s overall power generation cost will be negligible as gas-based power generation is a very small portion of the energy mix for the company.
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