The central government slashed the price of natural gas by 25 per cent to USD1.79 on September 28, 2020, the steepest rate cut so far. As per the Petroleum Planning and Analysis Cell’s (PPAC) order, the price of gas has been cut to USD1.79 per million British thermal unit (mmBtu) for the next six months, starting from October 01, 2020.
In April 2020, the price was slashed by 26 per cent bringing it down to USD2.39 per mmBtu. The price of natural gas is set every six months i.e. on April 1 and October 1, depending on rates prevalent in surplus nations like America, Canada and Russia. This is the third reduction in prices in a span of one year.
The price reduction is expected to significantly affect the revenue of producers like Oil and Natural Gas Corporation (ONGC). According to ONGC, the company incurred a loss of Rs. 42.72 billion during 2017-2018. This is likely to increase to over Rs 60 billion during 2020-2021. Meanwhile, the price cut might also lead to lower cost of electricity production and compressed natural gas as well as piped natural gas prices. Further, the loss from the gas segment used to get covered from the oil business in the previous years. However, the oil business is also under severe strain due to slump in the benchmark prices. The companies are now faced with more difficulties in meeting their operating expenses.