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CNG, PNG bills to shrink as domestic gas price dips 18%

By FnF Desk | PUBLISHED: 01, Oct 2016, 13:46 pm IST | UPDATED: 02, Oct 2016, 17:53 pm IST

CNG, PNG bills to shrink as domestic gas price dips 18% New Delhi: There's good news for households ahead of the festive season. CNG and PNG bills are set to come down substantially as the periodic revision in the price of gas produced from domestic fields kicked in on Friday to make the fuel cheaper by 18%, or $2.5 per unit from $3.06.

The revision, which happens every six months in tune with global benchmarks, is bad news for producers such as state-run ONGC and Oil India Ltd as well as private sector Reliance Industries as the new price could render many of their gas fields unviable.

For example, ONGC takes an annual revenue hit of Rs 4,000 crore for every dollar dip in gas price. The current reduction would affect the company's revenue by Rs1,000 crore in the remaining period of the fiscal.

The reduction will also hit the exchequer as royalty and income-tax will also go down by an estimated Rs800 crore during the remaining period of the fiscal.


But lower gas price would reduce input costs of CNG and PNG service providers who use supplies from domestic fields to feed common consumers. Reduction in CNG price could range between 80 paise and Rs 1.50 per kg. PNG prices are expected to come down between 50 paise and Rs1.5 per unit, in accordance with the respective price slabs.


It would also mean lower feedstock cost for power generation and manufacturing of fertilisers. Gas price was last cut by 20% to $3.06 from 1 April. The price of gas between 1 October 2015 and 31 March 2016 was $3.81 per unit and $4.66 in the preceding six months.


As per the formula approved by the Narendra Modi government in October 2014, gas price is to be revised every six months and the next change is due on 1 April 2017. The formula uses weighted average price in gas surplus markets such as the US/Mexico, Russia, Former Soviet Union territories and Canada and the UK with a lag of one quarter.
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