The underrecovery of Oil and Natural Gas Corporation (ONGC) from sale of gas at the government-fixed price is likely to exceed total revenues from its nominated fields in 2009-10.
Nominated fields were those allotted by the government to its companies before the sector was opened for competitive bidding in the 1990s. The calculation of underrecovery is done on the permissible 15 per cent post-tax return on capital.
The company, the biggest among the government-owned ones, incurred underrecovery of Rs 4,745 crore on total revenue of Rs 5,800 crore from sale of 17.71 billion cubic metres of gas in 2008-09.
“Today, we are losing heavily on APM (administered price mechanism) gas. The cost of production is going up. I am sure this year our underrecoveries would exceed our total revenues from gas. The gas price needs to be increased by almost 100 per cent, to about $3.5 a million British thermal unit (mBtu) as against the current $1.8 to help us make some marginal profit,” R S Sharma, chairman and managing director of the company, told Business Standard.