Domestic gas producers stand to lose Rs 2,000 crore by way of revenue in the second half of 2017, with the 18 per cent reduction in gas price by the government.
Domestic gas producers stand to lose Rs 2,000 crore by way of revenue in the second half of 2017, with the 18 per cent reduction in gas price by the government. The state-owned Oil India Limited (OIL) and ONGC, which contribute around 75 per cent of the total domestic gas production, will be impacted the most while Gail marketing segment can witness around Rs 900 crore — Rs 1,000 crore lower trading revenue from the sale of domestic gas, according to estimates by India Ratings and Research (Ind-Ra).
Domestic natural gas price which was earlier $3.06/mmbtu is now $2.50/mmbtu for the period October 2016 — March 31, 2017. Prior to this reduction the government had reduced domestic gas prices by 20 per cent in April 2016.
There has been a 50 per cent reduction in the price of natural gas with this fourth consecutive reduction since the implementation of the domestic gas pricing formula in October 2014.
The consumers of compressed natural gas and piped natural gas could benefit if the companies pass on the benefits of the downward revision of the natural gas price.
The revised price will translate into City Gas Distribution (CGD) entities lower costs of around Rs 1.4–Rs 1.5 per Standard Cubic Metre (SCM) on gas procurement.
The PNG prices have been reduced by Rs 1/scm and CNG by Rs 1.4/kg in Delhi, post this gas price revision. Ind-Ra is of the view that government could possibly revise the pricing formula or set a floor price to protect the domestic producers from losses resulting from a further fall in gas prices.
