In order to meet the increasing cost of production and also to enable the proposed capital investment of over Rs 19,000 crore in the 12th Five Year Plan period (2012-17), Oil India (OIL) asked the union oil ministry to raise natural gas price.
In a letter to the union oil ministry, the firm said its cost of production of natural gas from the nominated fields was increasing on sustained basis.
Therefore, it demanded upward revision in price for natural gas for state-owned firms alongside the planned hike in rates for private players like Reliance Industries, saying that the current margins are small.
It is learnt that the entire sale of natural gas by OIL is at the current administered price mechanism (APM) price of $4.2 and about 90 percent of ONGC’s gas sale is also at APM rates. The APM gas price was last revised in June 2010 to $4.2 per mmBtu from $1.79.
OIL argues that the current price will leave only a small margin, after adjusting for the corporte taxes. The firm estimates that its cost of production of gas during 2013-14 will be about $3.06 per million British thermal unit (as against the selling price of $4.2).
It also pointed out that out of the total production of 40.86 billion cubic meter of natural gas in the country during 2012-13, 26.19 bcm was produced by ONGC and OIL, which is about 64 percent of the total gas production in the country.
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