Domestic natural gas prices were cut by 12.5 per cent to $3.23 per million British thermal unit (mBtu) for the six-month period beginning October 1 from $3.69 at present.

This is the first reduction in rate since April 1, 2017.

Simultaneously, the government has cut the price of gas produced from difficult fields by 9.5 per cent to $8.43 per mBtu from $9.32 per mBtu, according to a notification by the oil ministry’s Petroleum Planning and Analysis Cell (PPAC).

Prices of natural gas are set every six months — on April 1 and October 1 each year.

Natural gas is used to produce fertiliser and generate electricity and is also converted into CNG for use in automobiles as fuel and cooking gas for households.

“The 12.5 per cent fall will result in lower CNG and PNG prices. This comes at a good time for CNG and PNG users as the economy is current reeling under high petrol and diesel prices and given the attack on Saudi Arabia there could be a potential shortage of LPG as well,” Madan Sabnavis, chief economist at Care Ratings, said.

“It could lead to a 6 per cent decrease in the cost of production of urea, thus decreasing the working capital intensity of fertiliser manufacturers and also acting as a relief for the fiscal spending of the government while disbursing the urea subsidy,” he added.