Oil and Natural Gas Corporation (ONGC) is losing Rs 6,000-7,000 crore on natural gas business after the government-mandated rates for the fuel dropped to a decade low. The government-mandated rates are way below the cost of production of $3.5-3.7 per million British thermal unit.
The company has been incurring losses on the 65 million standard cubic meters per day of gas it produces from domestic fields after the government in November 2014 introduced a new gas pricing formula that had ‘inherent limitations’ as it was based on pricing hubs of gas surplus countries such as the US, Canada, and Russia. The price, according to this formula, is revised twice a year and the rate for the period beginning October 1 has been cut by 25 percent to $1.79 per mmBtu.
ONGC is India’s largest government-run corporation and produces about 70% of India’s crude oil and natural gas. The corporation is the biggest public sector commercial organization in India.
