New Delhi, (IANS) : On the back of a major fall in global prices, India on Friday cut the price to be paid to producers of natural gas by 18 per cent to $2.5 per million British thermal unit (mbtu).

“The price of domestic natural gas for the period October 1, 2016 to March 31, 2017 is $2.50 per mbtu on Gross Calorific Value (GCV) basis,” said a notification issued by the government’s Petroleum Planning & Analysis Cell (PPAC).

The rate valid till Friday is $3.06 per mbtu.

This is the fourth reduction in 18 months as per the new gas pricing formula approved in October 2014. Gas prices are to be revised every six months and the next change is due on April 1.

The petroleum ministry also announced a sharp reduction in cap price based on alternate fuels for undeveloped gas finds in difficult zones like deep-sea, high-temperature, high-pressure areas which are unviable to develop as per the existing pricing formula.

The cap for October 1, 2016 to March 31, 2017, for gas from difficult areas will be $5.3 per mbtu, down from $6.61 in the preceding six-month period ending on Friday, the PPAC notification said.

Under the new pricing formula, rates are calculated by using prevailing price in gas surplus nations like the US, Russia and Canada. Indian gas prices are calculated by taking weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter.

It is being estimated that the price cut should result in a reduction of 50 paise to Rs 1.50 per standard cubic metre in the price of piped natural gas (PNG) for domestic consumers and an 80 paise to Rs 1.5 per kg cut in CNG prices.