Economy

Price of gas produced in India cut by 59 cents

Our Bureau New Delhi | Updated on March 27, 2015 Published on March 27, 2015

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From April 1, rate will be $5.02 per unit; electricity, piped gas set to be cheaper



Come April the price of electricity and piped cooking gas should get cheaper, as weak international prices have led the government to reduce the price of domestically produced natural gas by almost 59 cents. The new price will be $5.02 a unit, on the net calorific value.

The government is expected to shortly notify the new price, which will be applicable for six months from April 1, a senior official said.

This would mean electricity generated by power plants using domestic gas will be 25-30 paise cheaper per unit.

The price of piped natural gas and compressed natural gas will come down by a rupee, but this will happen only if the companies pass the benefit on to the consumer.

The gas price was revised on November 1, 2014 to $5.05 a unit on a gross calorific value basis applicable till March 31, 2015 ($5.61 a unit on the net calorific value). The new rates effective from April 1 on the gross calorific value will be about $4.56 a unit. The heat of the gas is measured in calorific value.

Local levies, transmission tariffs, marketing margins, among other components, will be added to this price.

Gas producers prefer gross calorific value as it gets them a higher price realisation for the entire volume, whereas net payment is made after discounting for the impurities in the fuel.

ONGC officials said that while the drop in price will impact the company’s revenues in the short term, it is not the benchmark for deciding on new investment proposals.

ONGC’s existing proposals also remain unaffected with this change in price, an official said.

Consumers may not gain

Those in the compressed natural gas and piped natural gas businesses say that when prices were increased they had not passed the cost on to consumers, and any decision now will depend on their finances.

The domestic gas price is determined under the New Domestic Natural Gas Pricing Guidelines, 2014, announced by the Narendra Modi Government shortly after it came to power.

Prices prevailing in Henry Hub (of the US), National Balancing Point (of the UK), Alberta (Canada), and Russia are used as inputs to derive the domestic gas price. The periodicity of price determination is half-yearly and the price and volume data used for calculation of the rates are from the trailing four quarters with a lag of a quarter.

The formula, however, still remains a bone of contention between the Government and some key operators.

Total natural gas supply in the country at present is 110 million standard cubic metres a day (mmscmd) of which 70 mmscmd is from indigenous producers and 40 mmscmd is met through imports.

The estimated demand for natural gas is over 200 mmscmd.

Published on March 27, 2015
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