Cut in natural gas price perk up shares of fertiliser companies

KS Badri Narayanan Chennai | Updated on October 01, 2019 Published on October 01, 2019

Active monsoon across India bodes well for the fertiliser sector as a whole.

The revised domestic natural gas prices as per the New Domestic Gas Policy 2014 will remain operational from October 1, 2019 till March 31, 2020.

Select fertiliser shares gained smartly on Tuesday in early deal after the government on Monday cut domestic natural gas prices for the first time in two-and-a-half years.

However, some of the stocks which opened on a positive note and gained further, could not hold on to the gains. Shares of Chambal Fertilisers & Chemicals, which touched a high of ₹162.9 in early trade, closed 0.39 per cent higher at ₹154.45 on the BSE. Other gainers include Deepak Fertilisers (1.64 per cent), Nagarjuna Fertlizers & Chemicals (3.66 per cent), Mangalore Chemicals & Fertilizers (3.14 per cent), Rashtriya Chemicals & Fertilizers (0.93 per cent) and Madras Fertilizers (0.46 per cent).

Read also: Domestic gas price cut by 12.5 per cent to $3.23 a unit

Some even slid into the negative territory. Among these are Gujarat Narmada Valley Fertilizers & Chemicals (down 1.31 per cent), GSFC (down 1.67 per cent), Coromandel International (down 0.23 per cent) and Fertilizers & Chemicals Travancore (down 0.25 per cent)

The Centre has revised domestic natural gas prices as per the New Domestic Gas Policy 2014. The revised price will remain operational from October 1, 2019 till March 31, 2020, ie, H2-FY20.

The gas price for locally-produced fields has been revised to $3.23/mmBtu from $3.69/mmBtu, resulting in a 12.5 per cent decrease, and the ceiling price for gas to be produced from difficult fields has also fallen to $8.43/mmBtu from $9.32/mmBtu, resulting in a 9.5 per cent decrease.

However, rates for gas produced from difficult fields such as Reliance Industries under-development fields in KG-D6 block will remain at almost the same level.

CARE Research in a report said a 12.5 per cent fall in natural gas prices augurs well for natural gas end-users as it decreases the cost of manufacturing of urea and petrochemicals where natural gas is used as feedstock.

Help from monsoon

According to analysts, active monsoon across India bodes well for the sector as a whole. According to official estimates, the June-September period this year was the wettest since 1994. With most States receiving excess rainfall (wettest September in more than a century), there is good chance of a bumper Kharif season. Also, because of high soil moisture after the late surge in rainfall, even the Rabi season may start on a good note.

Published on October 01, 2019
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