In what could increase the CNG prices for automobiles by around Rs five-six per kg, the government on Wednesday more than doubled the price of natural gas produced by Oil and Natural Gas Corp (ONGC) and Oil India Ltd to $4.2 per unit (Rs 189 per unit). This is at par with the rate at which Mukesh Ambani’s Reliance Industries Ltd (RIL) sells gas from the Krishna-Godavari block.
“The Cabinet has approved the petroleum ministry proposal to raise the rate of gas sold to power and fertiliser firms from $1.8 per unit (Rs 81 per unit) to $4.2 per unit (Rs 189 per unit),” a senior petroleum ministry official confirmed.
“ONGC and OIL will get $3.818 per unit price for the gas they produce from fields given to them on nomination basis and after adding 10 per cent royalty, the fuel will cost $4.2 per unit to consumers.”
The move will help ONGC and OIL breakeven the losses incurred by them in their gas sales business.
“The decision will generate around Rs 5,000 crore more revenue for ONGC every year and the same will help wipe out our losses in gas business,” R.S. Sharma, chairman and managing director, ONGC, told HT.
In 2008-09, ONGC lost Rs 4,745 crore in revenues on selling 17.7 billion cubic meters of gas at the government fixed rate of $1.8 per unit.
While the move will affect power generation tariffs and fertiliser production costs, since fuel cost in power and fertiliser business is pass-through (wherein companies pass on the cost to consumers), it will not impact any of the companies that buy gas from ONGC.