Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Politics / Policy/  Govt to pare natural gas price by 10.5% from 1 April
BackBack

Govt to pare natural gas price by 10.5% from 1 April

Price will be cut to $5.02 per mmBtu from $5.61 per mmBtu now; reduction has been aided by a steep fall in the prices of crude oil and gas.

Prime Minister Narendra Modi says India should aim for a 10% reduction of its energy imports by 2022 and a 50% cut by 2030. Photo: AFPPremium
Prime Minister Narendra Modi says India should aim for a 10% reduction of its energy imports by 2022 and a 50% cut by 2030. Photo: AFP

New Delhi: The government will lower the price of natural gas by 10.5% with effect from 1 April in a move that will benefit consumers, but dent the revenues of domestic gas producers such as state-owned Oil and Natural Gas Corp. Ltd (ONGC) and Reliance Industries Ltd (RIL).

The price will be cut to $5.02 per million British thermal units (mmBtu) from the current $5.61 per mmBtu, a person aware of the development said on condition of anonymity. Domestic prices were boosted by one-third to $5.61 per mmBtu on 1 November.

“The new price on the net calorific value basis will be announced shortly for the next financial year," the person said.

The reduction has been aided by a steep fall in the prices of crude oil and gas. The price of crude oil, to which liquefied natural gas price is typically linked, has plunged by half in the past year.

In October, the National Democratic Alliance government announced a new gas pricing formula using the weighted averages of prices in the three major international gas trading hubs of US Henry Hub, the UK National Balancing Point and Japan’s custom-cleared rate.

The new price for gas that is supplied to city gas distribution companies, fertilizer plants and power projects will benefit consumers, but will have an impact on the revenues and profits of gas producers.

An ONGC executive played down the impact on the company. “In the larger scheme of things, this is a very small difference to pay for the nation’s interest," he said on condition of anonymity.

A spokesperson for RIL, which has been engaged in a dispute over the recovery of cost to develop gas fields with the government, declined immediate comment.

RIL shares fell 2.27% to 811.75 apiece at the close of trading on BSE on Friday even as the benchmark Sensex ended barely changed at 27,458.64 points.

Oil minister Dharmendra Pradhan said the government had ushered in a progressive gas policy keeping the international scenario in perspective, which will benefit consumers and attract producers.

“Should consumer interests not be kept in mind or (should) only the producers’ interest be considered?" Pradhan asked rhetorically. “Can anybody afford to ignore India’s market size?"

Prime Minister Narendra Modi’s government, which has made energy security and supply a top priority, has unveiled a bailout plan for stranded gas-based power projects. India has a power generation capacity of 261,006 megawatts, of which less than 10% is fuelled by gas.

In another development, ONGC and Oil India Ltd may be exempted from paying their share of so-called under-recoveries to state-owned oil marketing companies Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd for the March quarter.

Total under-recoveries—the difference between market prices and retail fuel rates—to be borne by oil marketing companies next fiscal year are estimated at 42,500 crore.

The budget earmarked 22,000 crore for subsidy on domestic cooking gas and 8,000 crore for kerosene. Besides the fall in international crude oil prices, a stable rupee and continued monthly price hikes for petrol and diesel could help contain the subsidy bill.

On Friday, the Prime Minister said at an energy conclave that his government had moved decisively on the energy front despite some people saying petroleum sector lobbies would resist change.

Modi also said India should aim for a 10% reduction of its energy imports by 2022 and a 50% cut by 2030.

India imports 77% of its energy needs. Its energy import bill of around $150 billion (around 9.4 trillion) is expected to double to $300 billion by 2030.

The earlier United Progressive Alliance government had plans of making India self-reliant in energy by 2030, a target the International Energy Agency termed “very ambitious".

“If we have to develop, we will have to be self-sufficient in the area of energy," Modi said.

India has been successful in stemming subsidy leakage for cooking gas through direct benefit transfers, he said.

The government in its budget last month slashed the petroleum subsidy by half, and announced modest increases in food and fertilizer subsidies.

Modi said those who can afford to pay the market price for domestic cooking gas should give up the subsidy component.

He spoke about the government’s plan to provide piped domestic cooking gas connections to 10 million households in four years from the present 2.7 million.

The Prime Minister also referred to the importance of energy diplomacy, specifically with reference to building India’s relationship with the energy-rich regions of West Asia, Central Asia and the South Asian energy corridor. He also spoke about acquiring gas fields in North America and Africa.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
Catch all the Politics News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 27 Mar 2015, 11:59 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App