India to cut gas prices from April 1 after review panel report - sources

Logo of India's state-owned natural gas utility GAIL (India) Ltd is pictured in New Delhi
The logo of India's state-owned natural gas utility GAIL (India) Ltd is pictured on its corporate office building in New Delhi, India, April 26, 2018. REUTERS/Adnan Abidi

NEW DELHI, March 27 (Reuters) - India's cabinet is set to adopt a gas panel report this week, which has recommended capping the price for most local gas at $6.50 per million British thermal units (mmBtu) in April, two sources said on Monday.

India last year set up the panel, led by energy expert Kirit Parikh, to review India's gas pricing formula to ensure fair prices to consumers after state-set prices of gas from old fields and a ceiling price for output from hard-to-access, difficult blocks rose to record highs.

The panel suggested that the monthly price of gas produced from old blocks be fixed at 10% of the monthly average of the Indian crude basket, with a cap of $6.5/mmBtu and a floor price of $4/mmBtu.

The price will apply to industrial buyers and companies in the fertiliser and city gas distribution sectors and will be fixed on a monthly basis. The current price of gas from old blocks is set at $8.57 and is valid from October to end-March.

The average price of the Indian crude basket from 26th of the previous month to 25th of the current month would be used to determine the price of gas for the next month, one source familiar with the matter said.

Given that the average price of 10% of India's crude basket from Feb. 26 to March 25 is over $7/mmBtu, the price in April would be at the cap of $6.5/mmBtu, the source said.

Over 80% of India's yearly gas output of 91 billion cubic metres comes from old fields owned by the government-run Oil and Natural Gas Corp. and Oil India Ltd (OILI.NS).

Oman and Dubai crudes make up on average 75.6% of India's crude basket, with 24.5% coming from dated Brent.

The federal cabinet is scheduled to meet on Wednesday.

India's current local gas prices are linked to global benchmarks and are revised twice a year in April and October.

The panel also recommended removing the price cap for gas produced from difficult fields.

India's oil ministry did not respond to Reuters' request for comment.

The move to overhaul gas pricing is also part of Prime Minister Narendra Modi's aim to raise the share of gas in India's energy mix to 15% by 2030 from 6.2%, to help India meet a 2070 net zero carbon-emission goal.

Reporting by Nidhi Verma; Editing by Sharon Singleton

Our Standards: The Thomson Reuters Trust Principles.