India tweaks gas procurement norms for fertiliser firms to cut costs

India has tweaked the gas procurement policy for fertiliser companies, allowing them to buy about a fifth of their monthly needs through the local spot market to help the government cut its subsidy bill, two government sources told Reuters.

The government has amended the 2015 gas procurement guidelines under which fertiliser plants had to procure 80% of their gas needs through long-term contracts and the balance through three-month tenders.

"Three-month prices are high as there is lot of padding and hedging by suppliers, more so since there is so much volatility in the global gas prices," one of the sources said.

The sources declined to be named as they were not authorised to talk to the media.

Fertiliser plants bought gas at $38 per million British thermal units (mmBtu) for supply in the October-December quarter through a tender. The maximum price quoted in the tender was $55 while gas was available at the Indian Gas Exchange and bilateral markets for $15 to $20 per mmBtu.

The fertiliser ministry did not immediately respond to a request for comment.