ONGC lost Rs 4,745 crore in 2008-09

17 Dec 2009 Evaluate

State-owned Oil and Natural Gas Corp (ONGC) lost a whooping Rs 4,745 crore in revenues on selling natural gas at a rate below production cost in 2008-09. ONGC and state explorer Oil India Ltd (OIL) sell gas at government-controlled rates, called APM (Administered Price Mechanism) price. The APM price for ONGC currently is Rs 3,200 per thousand cubic meters (or Rs 3.2 per unit).

 

In 2008-09, its cost of production was Rs 5.87 per cubic meters. Against this the actual price realisation was just Rs 3.191 per unit. ONGC's total revenue loss on the 17.71 billion cubic meters gas it sold at APM rates last fiscal came to Rs 4,745 crore.

 

The APM rates at Rs 3.2 (or USD 1.79 per million British thermal unit) were not even half of the presumed market rate. The company will not breakeven on gas sales, even after the proposed increase in APM price is implemented.

 

The Oil Ministry has circulated a draft Cabinet note for raising price of gas under APM to Rs 4,142 per thousand cubic meters (USD 2.32 per mmBtu). APM rates were last revised in June 2005 and the hike proposed is based on Tariff Commission's recommendation that subsequently went into the issue.

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