Modi Move to Accelerate Gas Price Decision Lifts ONGC to Record

Oil & Natural Gas Corp. (ONGC), India’s biggest energy explorer, soared to a record in Mumbai on optimism Prime Minister Narendra Modi will take a decision on raising natural gas prices by the end of this month.

ONGC rose as much as 10 percent to 461 rupees, heading for the biggest gain in five years, and traded at 445.55 rupees as of 1:37 p.m. local time. Reliance Industries Ltd. (RIL), the nation’s biggest refiner and a producer of natural gas, gained as much 4 percent, the most since March 7. The two stocks were among the top three gainers today in the benchmark BSE S&P Sensex (SENSEX), which rose as much as 1 percent.

Modi is expected to give clarity on the gas pricing issue next week when he meets Oil Secretary Saurabh Chandra to discuss the priorities for the sector, according to a government official yesterday, who asked not to be identified pending an announcement. The oil ministry may decide on gas pricing by July 1, the official told reporters in New Delhi.

“Stocks of upstream companies are running up today on expectations the proposed gas-price increase will be approved by the government whenever it meets on the issue,” Sudip Bandyopadhyay, chief executive officer at Mumbai-based Destimoney Securities Pvt, said by phone.

New Formula

The Congress government, while it was in power, approved a new formula last year for calculating gas prices starting April 1, 2014. The method would almost double rates for the locally produced fuel from $4.2 per million British thermal units. The Election Commission on March 24 ordered the oil ministry to defer the increase until national elections ended on May 16.

The price increase will also benefit billionaire Mukesh Ambani-controlled Reliance, which operates a field off the nation’s east coast. Last month, Reliance served an arbitration notice to the government to increase prices.

Each dollar increase in gas prices will raise ONGC’s annual revenue by 40 billion rupees, Chairman D.K. Sarraf said on March 25. For every $1 increase in gas prices and at a production rate of 15 million cubic meters a day, Mumbai-based IIFL Holdings Ltd. estimates Reliance’s earnings per share will gain 1.5 percent in the year that began April 1.

“The uncertainty over gas pricing seems to be drawing to a close now,” said Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd. “Modi’s intervention is expected to accelerate a solution to the issue.”

The Bharatiya Janata Party, which took more than half the seats in parliament’s lower house last month in India’s biggest election win in 30 years, will introduce a new fuel policy as soon as it forms a government, said Narendra Taneja, national convener of the party’s energy division, on March 20.

Implicit in that will be raising prices to spur investment and cut imports that account for 80 percent of the nation’s crude oil and more than 30 percent of its natural gas needs, industry experts said.

To contact the reporters on this story: Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net; Ameya Karve in Mumbai at akarve@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Indranil Ghosh, Sam Nagarajan

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