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India keeps domestic gas prices on hold for now

Technicians stand next to an oil rig which is manufactured by Megha Engineering and Infrastructures Limited (MEIL) at an Oil and Natural Gas Corp (ONGC) plant, during a media tour of the plant in Dhamasna

NEW DELHI (Reuters) - India will provisionally keep the price of locally produced gas from old fields at $8.57 per million metric British thermal units (mmBtu), the government said on Friday, while it considers a potential change to the pricing formula.

Under the existing formula, the price was due to go up for April-September, but to ensure fair prices for consumers and that inflation is kept in check the federal government last year set up a panel to review it.

The panel suggested the monthly price of gas 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 cabinet is expected to consider the recommendation soon.

Keeping gas prices at the current level could hit the earnings of producers such as government-run Oil and Natural Gas Corp. (ONGC) and Oil India Ltd.

Over 80% of India's yearly gas output of 91 billion cubic metres comes from old fields owned by ONGC and Oil India.

India currently links prices of locally produced gas from old fields to a formula tied to global benchmarks, including Henry Hub, Alberta gas, NBP and Russian gas. It revises prices twice in a year, in April and October.

"US$ 8.57/MMBTU on Gross Calorific Value (GCV) basis, will continue to be applicable on a provisional basis beyond 31st March 2023, till further order," the government said in a statement.

However, it added it had lowered the ceiling price of domestic natural gas from difficult fields for April-September to $12.12 per mmBtu from $12.46 per mmBtu.

(Reporting by Nidhi Verma and Shivam Parel; Editing by Mark Potter)