<div>India Ratings and Research (Ind-Ra) expects the benefit from reduced gas price to be partly offset by the near 6 per cent rupee depreciation over April-September 2015. The government has reduced the domestic gas prices by 18 per cent to $3.82/mmbtu applicable for 1 October 2015 to 31 March 2016. Thus, the net impact of the reduced domestic gas prices in rupee terms would be nearly 11 per cent-16 per cent. </div><div> </div><div>Ind-Ra expects the compressed natural gas (CNG) and piped natural gas (PNG domestic) end-consumers of city gas distribution entities to benefit from the downward price revision. Over April-September 2015, the price of alternate fuel - diesel - declined by 8 per cent while that of CNG remained unchanged, thus lowering the fuel competitiveness of CNG. Ind-Ra expects the benefits of lower gas prices to continue to be passed on to the consumers. It further expects an Rs2.1/scm-Rs2.3/scm cut in PNG prices and an Rs 2.8/kg-Rs3.0/kg cut in CNG prices. This would make CNG 44 per cent-45 per cent more competitive than diesel, compared with 39 per cent currently. Similarly, PNG would be 1 per cent-2 per cent more competitive than subsidised LPG, compared with negative 8 per cent currently.</div><div> </div><div>This is the second domestic gas price reduction and is driven by the decline in average gas prices prevalent at the reference hubs over the period July 2014-June 2015. The first downward price revision was to $4.66/mmbtu (million British thermal unit) from $5.05/mmbtu on 1 April 2015. The average Henry Hub gas prices declined to $3.33/mmbtu from $4.35/mmbtu over January-December 2014. </div><div> </div><div>Ind-Ra expects the two major domestic gas producers – Oil India Limited and Oil and Natural Gas Corporation Limited - to face a revenue decline of Rs120 crore-Rs 130 crore and Rs 1080 crore-Rs 1150 crore, respectively, on gas sales during 2HFY16 as the prices have been reduced by 18 per cent. In the mid-stream segment, Gail (India) Limited (‘IND AAA’/Stable) would see Rs 1790 crore-Rs 1900 crore lower trading revenue from the sale of domestic gases during 2HFY16.</div><div> </div>
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