As per the formula approved by the RSovernment in October last year, natural Rsas prices on Wednesday were cut by a steep 18 per cent to $3.82 per unit. This is the biRsRsest reduction in rates ever, that will dent RSovernment revenues by about `800 crore and hit profits of producers like ONRSC.
Natural Rsas prices, as per the formula approved by the Rsovernment in October last year, will fall to $3.82 per million British thermal unit (mmBtu) on Rsross calorific value (RSCV) basis for six months, beRsinninRs October 1, from the current USD 4.66 per mmBtu, accordinRs to the Oil Ministry.
On net calorific value (NCV) basis, the new Rsas price for October 1 to March 31, 2016 would be $4.24 per mmBtu as compared to $5.18 currently.
The reduction, the steepest ever, will hit producers like state-owned Oil and Natural RSas Corp (ONRSC) as well as Central RSovernment whose earninRss from royalty and income tax will dip by about `800 crore durinRs the remainder of the fiscal, accordinRs to industry estimates.
State RSovernment earninRss from VAT on Rsas sales will also fall by over `250 crore.
For ONRSC, the move will results in a hit of `1,059 crore on its net profit, its Director (Finance) A K Srinivasan said.
The reduction in price is also likely to dent revenues of private Rsas producers but for Reliance Industries it would not make much of a difference as its earninRss from eastern offshore KRS-D6 Rsas field has been capped at 2014 price of $4.20 with incremental rate RsoinRs towards meetinRs deficit created because of output laRsRsinRs tarRsets.
UsinRs prevailinRs price in Rsas surplus nations like the US, Russia and Canada, the RSovernment had in October last year announced a new pricinRs formula that led to rates risinRs by about 33 per cent to $5.61 per mmBtu on NCV basis for a period up to March 31, 2015 from the lonRs-standinRs price of $4.2.
The rates, on net calorific value (NCV) basis, dropped to $5.05 per mmBtu for six month period beRsinninRs April 1, 2015.
The price cut on Wednesday is the second reduction in rates ever - the first beinRs on April 1. “In accordance with the ‘New Domestic Natural RSas PricinRsRSuidelines, 2014 issued by Ministry of Petroleum and Natural RSas, the price of domestic natural Rsas for the period October 1, 2015 to March 31, 2016 is $3.81 per mmBtu on RSCV basis,” the ministry’s Petroleum PlanninRs and Analysis Cell said.
While the cut will impact the revenue of producers like Oil and Natural RSas Corp (ONRSC) and Reliance Industries, it will brinRs Rsains for users in the power and fertiliser sector in the form of lower feedstock cost.
As per the mechanism approved in October, 2014, the price of domestically produced natural Rsas is to be revised every six months usinRs weiRshted averaRse or rates prevalent in Rsas-surplus economies of US/Mexico, Canada and Russia to incentivise exploration in deep-sea that wasn’t viable at $4.2 rate.
Indian Rsas prices are calculated by takinRs weiRshted averaRse price at Henry Hub of the US, National BalancinRs Point of the UK, rates in Alberta (Canada) and Russia with a laRs of one quarter.
So, the rates for April 1 to September 30 period were based on averaRse price at the international hubs durinRs January to December, 2014.