Rs 3000-cr blow to oil firms
The sharp cut in domestic natural gas prices will impact the revenues of state-owned energy producers such as ONGC, Oil India and gas transporter GAIL (India) Ltd by about Rs 3,000 crore.
The government has slashed prices by 18 per cent to $3.82 per million British thermal unit (mBtu) on gross calorific value basis (GCV) for the remaining six months of this fiscal.
Besides, the depreciation of the rupee against the dollar will prevent power and fertiliser firms from taking full advantage of the cut.
Oil India’s revenues are expected to fall Rs 120-130-crore, while ONGC earnings will take a Rs 1,080-1,150-crore hit on sales during the second half of the current financial year, Vivek Jain, associate director of India Ratings, said in a research note.
The move will shave off Rs 1,059 crore from ONGC’s net profit, the company’s finance director A.K. Srinivasan said.
GAIL (India) Ltd will see Rs 1,790-1,900 crore lower revenues from the sale of gas from October to March 2016, he said.
Jain said the agency expected the benefit from the reduced gas price would be partly offset by the near 6 per cent depreciation in the rupee during April-September. The net impact of reduced gas prices in rupee terms will be nearly 11-16 per cent.
As the gas pooling arrangement is in place for the fertiliser sector, the price will be averaged out with imported regasified liquefied natural gas bought both under the long-term contract as well as at spot prices.
A little over 60 per cent of gas supplied to the fertiliser industry come from domestic sources. Therefore, the impact will be around 60 cents per mBtu of gas, which will lead to a Rs 1,000-per-tonne reduction in the total input cost.
The gas price cut could lead to a fall in compressed natural gas (CNG) prices by up to Rs 3 per kg and piped natural gas (PNG) prices by Rs 2.3 per unit, India Ratings said.
This is the second reduction in gas price after April 1. The formula approved by the government is based on the US, UK, Canadian, and Russian gas prices based on the twelve-month trailing average with a lag of three months.
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