Sources associated with the case said that gas prices are to be revised from October 1. Gas prices will come down from $ 1.90 to $ 1.94 per million British thermal units (MMBtu) as per the benchmark rates of gas exporting countries. This will be the third consecutive cut in gas prices in a year. Earlier in April, there was a huge cut of 26 percent in gas prices, which reduced its price to $ 2.39 per unit.
Natural gas is used in fertilizer and power generation. In addition, it is converted to CNG, which is used in vehicles. It is also used as a cooking gas. Gas prices are fixed every six months on April 1 and October.
Sources said that the reduction in gas prices means that the deficit of ONGC, the country's largest oil and gas producer, will increase further. ONGC incurred a loss of Rs 4,272 crore in the gas business in 2017-18. Sources said that it is expected to increase to Rs 6,000 crore in the current financial year.
ONGC is losing out on production of 65 million cubic meters of gas per day. The government introduced a new gas price formula in November 2014. It is based on the price centers of countries with gas surpluses such as the US, Canada and Russia. Currently, the gas price of $ 2.39 per unit is the lowest in more than a decade.
Sources said ONGC in a recent letter to the government has said that it can remain in a state of profit only if the gas price due to new discoveries is $ 5-9 per mmbtu.
In May 2010, the government raised the price of gas sold to electricity and fertilizer companies from $ 1.79 per unit to $ 4.20 per unit. ONGC and Oil India used to get $ 3.818 per unit for gas production from the given fields on nomination basis. After adding a 10 percent royalty to it, it cost consumers about $ 4.20.
The Congress-led United Progressive Alliance government (UPA) approved a new price formula that was to be implemented from 2014. This would have increased gas prices. But it was canceled by the BJP-led government and introduced a new formula. Through this formula, the gas price was $ 5.05 per unit at the time of the first revision, but after that the gas prices kept coming down in the half yearly revision. During the period April 2017 to September 2017, the price of gas came down to $ 2.48 per unit.
It increased to $ 3.69 during April 2019 to September 2019. It was then pegged at $ 3.23 per unit in October 2019.