Impact of higher gas pricing
A Kotak Institutional Equities research by Sanjeev Prasad, Tarun Lakhotia and Tarun Kumar estimates a 6% increase in average consumer price of power and a 2% increase in fiscal deficit from higher fertiliser subsides. However, there will be significant improvements in the profitability of the ONGC and OIL if the government hikes the price of natural gas produced from nominated fields to $6-8/mmBtu from $4.2/mmBtu currently. Also, the royalty paid on natural gas produced from nominated fields will increase, which may curtail the benefit for these upstream companies. For Reliance Industries, the decline in gas production from KG D-6 block would offset the positive impact of higher gas prices.
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