India to make unusual 9% cut in gas prices from 1 April

In the first reduction of natural gas prices in India, the rate for LNG will be slashed by 9 per cent to $4.56 per unit from 1 April, reflecting the softening in international prices.

The government has decided to cut prices of natural gas to $5.02 per mmBtu, from $5.61, according to various reports, though there was no official confirmation.

Lower LNG prices would ease matters for gas-run power firms. CNG or domestic cooking gas prices are also expected to fall.

The Narendra Modi government in October last year had approved the raising of the natural gas price by over 30 per cent to $5.61 per mmBtu, from $4.2 per unit. The new rates were effective from 1 November and supposed to be revised every six months.

The government had modified the Rangarajan formula approved by previous UPA government to bring down the increase in rates from $8.4 per unit to $5.61.

The previous UPA government had in 2013 approved a price formula suggested by a panel headed by C Rangarajan and it was supposed to be implemented from 1 April 2014, that would have doubled prices.

Before the gas rates could be notified, general elections were announced and Election Commission asked the then government to defer it till completion of polls.

The government does not fix or notify a rate for natural gas, according to industry sources. A formula was notified last year, based on which the price applicable from 1 April would be $4.56 per mmBtu on GCV basis.

This will be the first reduction in price of natural gas ever in India. While it will hurt impact the revenue of producers like Oil & Natural Gas Corp and Reliance Industries, it will be a booster for users in the power and fertilizer sectors.