Shares of several fertiliser companies witnessed selling pressure on Friday after the government raised the price of domestically produced gas by 62 percent to $2.90 per million British thermal units.

Natural gas is used to produce electricity and is turned into CNG to use as fuel in automobiles and cooking gas for household kitchens.

With the hike in natural gas prices, the cost of producing fertilisers is also expected to go up. This is because natural gas is the most preferred feedstock used for producing fertilisers.

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Domestic natural gas price hiked by 62% to $2.90 for October 2021 to March 2022 period

Fixed costs for fertiliser companies are expected to increase due to the natural gas price hike, said an analyst from a domestic brokerage firm.

She said that the price hike would weigh on the profitability of fertiliser companies to some extent as the cost of producing fertiliser would rise.

At 11:16 am, shares of fertiliser companies like Gujarat State Fertilizers & Chemicals, National Fertilizers, Rashtriya Chemicals & Fertilizers, Zuari Agro Chemicals, Gujarat Narmada Valley Fertilizers & Chemicals, Deepak Fertilisers & Petrochemicals Corporation and Nagarjuna Fertilizers and Chemicals were down about 1-2 percent.

The new price will be effective for six months starting today.

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This is the first hike since April 2019 when the price was at $1.79 per Metric Million British Thermal Unit (mmBtu). The revision, which is in line with the expectation of a 60 to 70 percent hike, comes on the back of the surge in global gas prices.

The 62 percent hike in domestic natural gas price was largely along expected lines, Macquarie said.

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First Published:Oct 1, 2021 12:26 PM IST