Domestic Gas prices likely to reduce further: India Ratings

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26 Aug, 2025 12:21

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India Ratings' report on Domestic gasIndia Ratings and Research (Ind-Ra) expects the benefit from reduced gas price to be partly offset by the near 6% rupee depreciation over April-September 2015. The government has reduced the domestic gas prices by 18% to USD3.82/mmbtu applicable for 1 October 2015 to 31 March 2016. Thus, the net impact of the reduced domestic gas prices in rupee terms would be nearly 11%-16%.Ind-Ra expects the compressed natural gas (CNG) and piped natural gas (PNG domestic) end-consumers of city gas distribution entities to benefit from the downward price revision. Over April-September 2015, the price of alternate fuel - diesel - declined by 8% while that of CNG remained unchanged, thus lowering the fuel competitiveness of CNG. Ind-Ra expects the benefits of lower gas prices to continue to be passed on to the consumers. It further expects an INR2.1/scm-INR2.3/scm cut in PNG prices and an INR2.8/kg-INR3.0/kg cut in CNG prices. This would make CNG 44%-45% more competitive than diesel, compared with 39% currently. Similarly, PNG would be 1%-2% more competitive than subsidised LPG, compared with negative 8% currently.This is the second domestic gas price reduction and is driven by the decline in average gas prices prevalent at the reference hubs over the period July 2014-June 2015. The first downward price revision was to USD4.66/mmbtu (million British thermal unit) from USD5.05/mmbtu on 1 April 2015. The average Henry Hub gas prices declined to USD3.33/mmbtu from USD4.35/mmbtu over January-December 2014. Ind-Ra expects the two major domestic gas producers – Oil India Limited and Oil and Natural Gas Corporation Limited - to face a revenue decline of INR1.2bn-INR1.3bn and INR10.8bn-INR11.5bn, respectively, on gas sales during 2HFY16 as the prices have been reduced by 18%. In the mid-stream segment, Gail (India) Limited (‘IND AAA’/Stable) would see INR17.9bn-INR19bn lower trading revenue from the sale of domestic gases during 2HFY16.

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