India’s revised gas pricing formula to aid demand, upstream profit stability: Fitch
1 year, 8 months ago

India’s revised gas pricing formula to aid demand, upstream profit stability: Fitch

Live Mint  

New Delhi: India’s decision to limit prices of domestic natural gas from legacy fields to between $4 per million British Thermal Unit and $6.5 will support margins for city gas distributors, encourage the use of gas, and reduce cash flow volatility for upstream producers, Fitch Ratings said on Wednesday. “We expect a partial pass-through of the lower administered price mechanism gas prices, at which domestic upstream producers supply gas to city gas distributors, in the prices of compressed natural gas and domestic piped natural gas to add to the distributors‘ margins in the near term,” it said. “We expect such price cuts by city gas distributors and the fixing of a price ceiling to add certainty to domestic natural gas’ price advantage relative to alternative fuels, supporting gas usage for transportation and households, and overall demand in the medium term,” Fitch said. Fitch expect the price floor and ceiling to reduce volatility in cash flows from gas production for Oil India Ltd and Oil and Natural Gas Corp Ltd. “The floor is higher than APM prices over 2015 to 2021 while the ceiling is below current market prices.

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