ONGC claims Rs4,745-crore loss on selling gas at government’s prices

Continuing its complaint against the government's oil and gas pricing policies ahead of the Kirit Parikh committee on fuel pricing, state-owned Oil and Natural Gas Corp said that it lost Rs4,745 crore on account of selling natural gas below the production cost in 2008-09.

ONGC and fellow state-owned explorer Oil India Ltd (OIL) sell gas at government-controlled rates, called the administered price mechanism APM. The APM price for ONGC is Rs3,200 per thousand cubic metres (or Rs2 per unit). ''In 2008-09, our cost of production was Rs 5.87 per cubic metres. ''Against this, our price realisation was just Rs3.191 per unit,'' reports quoted an unnamed ONGC official as saying. ONGC's total revenue loss on the 17.71 billion cubic metres gas it sold at APM rates last financial year came to Rs4,745 crore, he added.

''The APM rates at Rs 3.2 (or $1.79 per mmBtu) were not even half of the presumed market rate,'' he said, adding, ''We will not break even on gas sales, even after the proposed increase in APM price is implemented.''

The petroleum ministry is apparently pushing for a phased increase in the APM gas price to bring it in line with market-determined prices applicable to blocks awarded through various rounds of bidding held under national exploration licensing policy (NELP). However, the power and fertiliser ministries are opposing the proposal.

The breakeven point for ONGC is Rs4,559 per thousand cubic metres for gas, and after considering a return on capital as suggested by the Tariff Commission, it works out to Rs5,870 per thousand cubic metres.

However, the current price for ONGC's APM gas is Rs 3,200 per thousand cubic metres.