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Govt cuts natural gas prices by 18% to $4.24 per unit

The October 1, 2015 to March 31, 2016 rate will be based on average of prices during July 1, 2014 to June 30, 2015.

By: Express News Service | New Delhi |
Updated: October 1, 2015 2:38:12 am
On gross calorific value (GCV) basis, the new gas price for October 1 to March 31 would be USD 3.82 per mmBtu as compared to USD 4.66 currently, officials said. (Source: Reuters photo) On gross calorific value (GCV) basis, the new gas price for October 1 to March 31 would be USD 3.82 per mmBtu as compared to USD 4.66 currently, officials said. (Source: Reuters photo)

With the 18 per cent reduction in domestic natural gas price effective October 1, state-owned explorer ONGC would take a hit of Rs 1,059 crore on its profit after tax (PAT) in the second half of the fiscal.

According to a circular from the Petroleum Planning and Analysis Cell (PPAC), the price of natural gas from domestic fields would drop to $4.24/mBtu from October 1 on net calorific value (NCV) basis, from $5.18/mBtu previously. The revised price on a gross calorific value (GCV) basis would be $3.82/mBtu.

The new price, determined on the basis of a formula linked to select global gas price indices, would be valid for six months, that is, till March 2016. “For the second half of FY16, there is going to be a negative impact with revenues dropping by Rs 2,046 crore on our revenue generation level and profit before tax by Rs 1,620 crore. The impact of the price reduction on PAT would be R1,059 crore,” said A K Srinivasan, director (finance) of ONGC. The fall in prices is negative for other gas producers — Reliance Industries, Cairn and Oil India — as well, but the stocks of these companies have already factored in the price drop. RIL’s KG D6 output is at an all-time low of 10-11mmscmd, a far cry from the level of 69 mmscmd achieved in March, 2010.

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The gas price formula, which tweaked the one proposed by the Rangarajan committee, was approved by the Narendra Modi government in October last year. While the price was fixed at $5.61/mBtu for the period November 2014 to March 2015, it was revised to $5.18/mBtu for the subsequent six months. While Indraprastha Gas stock jumped 8.3 per cent to Rs 498.70 intra-day, ONGC closed 1.35 per cent higher at Rs 229.50, while Oil India fell 0.88 per cent to close at Rs 422.75. FE

Centre to join Cairn tax arbitration soon

New Delhi: A few days after finance minister Arun Jaitley announced he would be settling all outstanding tax disputes soon, the income tax department has written to Cairn Energy saying it will be appointing an arbitrator in the $1.6-billion tax demand case soon — apart from the basic tax, interest and penalties also have to be paid. On September 16, the tax department wrote to Cairn conveying this while saying “this is without prejudice to our firm view that the tax disputes referred to in the said notice for arbitration do not fall within the scope of the India-UK BIPA”. How long the final resolution will take is not clear since several arbitration cases involving the government have been pending for two to three years.  FE

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