Domestic natural gas prices are likely to be slashed by around 10 percent to $ 5.02 per unit from April 1, as compared to the current price of $5.61. On a gross-calorific value basis, the price will be around $4.67 per mmBtu as compared to $5.05 currently. The revised price from April 1 is arrived at by applying the Cabinet-approved formula on the select average global prices for the fuel between January and December 2014. The new government had in October 2014 used the new formula to fix price of almost all domestically produced natural gas at $5.61 per mmBtu for the period up to March 31.
There was a drop in prices at international gas hubs in the second half which led to the reduction in price - US Henry Hub dropped from $ 6 per mmBtu in February to $ 3.78 per mmBtu in October and from $ 10.72 per mmBtu on NBP in January to $ 6.40. The new price based on a net calorific value basis will be announced shortly and will be valid for the first half of 2015-16.
The CCEA on October 18 last year approved the formula, after tweaking the Rangarajan formula approved by the UPA government in June 2013. The price is to be revised every six months. Rates for next six months are to be decided based on one year average price at Henry Hub of US, National Balancing Point of UK, rates in Alberta (Canada) and Russia with a lag of one quarter.
This will be the first reduction in natural gas in India, though the current price of $ 5.61 per mmBtu is already among the lowest in Asia Pacific. China pays $ 11.9 per mmBtu rate for new projects, while Indonesia and the Philippines pays the explorer $ 11 and $ 10.5 respectively.