Well, reports are coming straight from the State-owned Oil and Natural Gas Corp where their fiscal year end up with the loss of Rs 4,000 crore on Natural Gas. The reports are saying that the government mandated price for the fuel was less than the cost of production. Also, the senior official from the company came out and clarified the whole thing.
As per the reports, he said that“We need at least $4 per million British thermal unit to break-even as compared to the current gas price of $3.06 per mmBtu.” As you all may know that a new mechanism approved by the government in October 2014, the price of domestically produced natural gas is to be revised every six months with the same a formula like other big countries.
Overall, with that formula, they came close but the price for April to September came to $3.06 per mmBtu as compared to $2.89 in previous six months. Still, they didn’t make any profit because of the double speed increasing rate of the cost. Now they are in trouble because this loss isn’t very easy and it will take a lot of time to rebuild it.
The official said that “Our average cost of production is about $5.14 per mmBtu. It comes to about $3.59 per mmBtu without taking into account return on capital.” Also, they added that “Gas production is now a loss-making business as irrespective of the cost of production we have to continue paying royalty and other taxes.”
You all should know that Prices have been less than $4 since October 2015. “Natural gas is no more a profitable business because the cost of production is very significantly higher than current gas prices,” this statement is given by the officials. You all may know that already CNGS is the India’s largest natural gas producer and now they are demanding a floor or minimum price of natural gas be fixed at $4.2 per mmBtu for the business to make economic sense.
