Govt mulls raising ONGC gas price to RIL level

The government is mulling more than doubling the price of natural gas produced by state-owned Oil and Natural Gas Corporation to $4.20 per mmBtu, to bring it on par with rates of Reliance Industries' gas.

Oil ministry had previously proposed a 30 per cent hike in price of gas produced by Oil and Natural Gas Corporation and Oil India Ltd to $2.3 per mmBtu but finance ministry wants these rates to be brought on par with RIL, sources in the know of the development said.

Price of gas produced by ONGC and OIL from fields given to them on nomination basis were last revised in 2005.

Current rates of Rs 3,200 per thousand cubic meters ($1.79 per million British thermal unit) are less than half of the $4.2 per mmBtu price of gas from KG-D6 field of RIL.

Oil ministry had a while ago circulated a Cabinet note for hiking price of gas under administered pricing mechanism to Rs 4,142 per thousand cubic meters ($2.32 per mmBtu).

However, on the finance ministry's insistence, it has withdrawn the Cabinet note and is likely to move a fresh note seeking to raise price of gas under APM to Rs 7,500 per thousand cubic meters or $4.2 per mmBtu, sources said.

The increase in rates would be in one stage, they said.

About 39 per cent of the nation's 140 million standard cubic meters a day of gas output is sold at administered rate.

A hike in rates of these is an attempt to reduce distortions in a market with more than a dozen prices.

The government has set $4.2 per mmBtu as the sale price of gas from Reliance Industries' eastern offshore KG-D6 fields, while the gas from BG Group-operated Panna/Mukta Tapti fields is sold at $5.73 per mmBtu.

State-run ONGC lost a whopping Rs 4,745 crore (Rs 47.45 billion) in revenues on selling 17.71 billion cubic meters of natural gas at a rate below production cost in 2008-09.

Sources said 54.32 mmscmd gas produced by ONGC and OIL is sold at APM rates of $1.79 per mmBtu.

RIL produces about 64 mmscmd of gas from KG-D6.