Thought the new regime for gas pricing put in place by the Narendra Modi government would inevitably lead to increase in the price of this commodity every six months? Given the fall in global commodity prices, if the government-approved formula is applied on the selected benchmark prices of gas in specified markets for the relevant periods, the domestic price of gas for April-September 2015 will be $5.18 per million British thermal units, 7.6% lower than the current price of $5.61 per mmBtu, reports Siddhartha P Saikia in New Delhi.
Further, going by the futures contract for the period to be reckoned for the subsequent price revision, the gas price could be still cheaper effective October and come in the vicinity of the pre-November 2014 price of $4.2/mmBtu..
The revised price for six months starting April 1 is to be calculated according to the average global prices specified by the government, between January-December 2014. As per the October 18 decision of the Modi government, the new gas price of $5.61/mmBtu on a net calorific value basis came into effect on November 1, 2014, and is to be valid until the end of the current fiscal, following which the price would be revised, and again, changed every subsequent six months.
The price and volume data to be used for the periodic price revisions is the average of the four quarters preceding the price change, excluding the immediate past quarter for absence of full data availability.
The current pricing formula, different from the Rangarajan formula approved by the UA government (which would have doubled price from $4.2) , factors in gas consumption in USA, Mexico, Canada, EU and Russia. Although a premium is meant to be given for deep-waters gas which India has good reserves of, analysts say that the current price is not attractive to investors, contending that a price below $10/mmBtu is unviable.