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Government Cuts Natural Gas Prices to a Decade Low, A Move Likely to Ruin Returns for Indian Producers

Natural Gas prices in the country touched a record low after the government on Wednesday induced a ground-breaking cut by 25 per cent making the prices to tumble at USD 1.79. Prices offered to producers of new gas from difficult fields have also been sufficiently reduced from USD 5.61 MMBtu to USD 4.06. These prices have been revised as per British Thermax Unit for a period of straight six months starting from 1st October 2020. Natural gas is widely utilized in plethora of applications including the production of electricity, manufacturing of fertilizers and as CNG for automobile. While this negative price revision has raised serious concerns over the revenues of the domestic gas producers such as ONGC and GAIL, it may emerge favourable for cutting down the cost associated with electricity and CNG production, accompanied by a relief in piped natural gas prices. Prices of Natural Gas are revised on every six months in between April 1 to October 1, governed by the rates pertaining to leading producing nations such as Russia, U.S and Canada.