Natural gas price cut by 8% to $4.66/ unit

NEW DELHI: The government has cut the natural gas price by 8% from Wednesday, aligning it with the international benchmarks with which it is linked by a formula. The government had introduced a local gas-pricing formula in October thattakes the average annual price at four energy hubs in the US, Canada, Russia and the European Union to calculate the gas price producers at most domestic fields can receive.

In its first revision since the introduction of the formula, the price has been cut to $4.66 per million British thermal unit (mmbtu) on gross calorific value basis. On net calorific value basis, it will cost about $5.18 per unit compared with $5.61 previously. The gas prices are due for revision every six months.

The reduction follows the global decline in oil and gas prices. Since June last year, crude oil prices have almost halved and the price of liquefied natural gas has slumped to less than $8 a unit from $14. Lower gas prices act as a disincentive to explorers as it reduces returns on billions of dollars of risk capital. Private energy firms have long lobbied for higher prices, saying government-fixed prices have been unremunerative. India's gas output has fallen about 6% between April and February in 2014-15 even as 24000 mw of gasfired generators across the country stayed idle or underutilised. Imports accounted for a third of the gas the country consumed in 2013-14.