Even as the government’s decision to about double the price of gas produced in the country has brewed a political storm, ONGC has said gas produced at some of its field may not be viable even at the new price.
Newly-appointed chairman DK Sarraf said that the state-run company is poised to increase its revenue by Rs 16,000 crore and profits by Rs 9,000 crore, thanks to the gas price hike, but added that for some of its basins, exploration at some fields at even a price of USD 11 per unit would not be feasible.
Recently, the government agreed to implement the recommendations of a panel headed by former RBI governor C Rangarajan that asked for prices to based upon a formula that currently works out to about USD 8 per unit.
The new gas price formula comes into effect in April. The current price that the government pays to contractors for producing natural gas is USD 4.2 per unit.
The issue of gas production has acquired a political turn after the Aam Aadmi Party accused the government of giving in to corporate interests by doubling the price. Explorers such as Mukesh Ambani’s Reliance Industries Ltd, along with ONGC, operate in the resource-rich KG basin area off the Andhra Pradesh coast.