Centre planning benchmark-linked floor price for locally produced natural gas: Report
The Ministry of Petroleum and Natural Gas has formed a panel to study the plan and explore other options to make gas production remunerative
September 25, 2020 / 09:52 PM IST
In order to aid and ensure continued viability of state-run players like Oil and Natural Gas Corporation (ONGC), the government is weighing a proposal to fix a floor price for domestically produced natural gas, according to a Bloomberg report.
Sources quoted in the report said the proposal also suggests linking the floor price to the popular benchmark Japan-Korea Marker that is used for LNG tariff in North Asia with a discount.
The Ministry of Petroleum and Natural Gas has formed a panel to study the plan and explore other options to make gas production remunerative, the sources said.
This comes amid a drop in gas tariffs, which are only expected to slump further in the coming month, according to CARE Ratings.
At present, prices of natural gas from domestic oilfields are not determined by the demand-supply dynamics. India uses a formula to price domestically produced natural gas, with a bi-annual revision in accordance with the 2014 domestic gas policy.
The domestic gas price fixed at $2.39 per mmBtu for the first half of FY21 ends on September 30. It is likely that prices may be slashed by over 17 percent this time, which would push it below $2/mmBtu for the first time. This slump is expected on account of a drop in global prices due to increased production and lower demand amid coronavirus.
The government has set a target to increase the share of natural gas in India's energy basket from the current 6 percent to 15 percent by 2030.