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ONGC sees up to Rs7,000-cr loss

India’s top oil and gas producer ONGC on Friday said it is losing Rs 6,000-7,000 crore on natural gas business after the government-mandated rates for the fuel dropped to a decade low.

The government-mandated rates are way below the cost of production of $3.5-3.7 per million British thermal unit, ONGC Director (Finance) Subhash Kumar said. Every dollar reduction in gas price leads to a revenue loss of about Rs 5,200 crore and a Rs 3,500 crore on profit.

“Our losses will be in the order of Rs 6,000-7,000 crore in current fiscal,” he said.

ONGC has been incurring losses on the 65 million standard cubic meters per day of gas it produces after the government in November 2014 introduced a new gas pricing formula that had “inherent limitations” as it was based on pricing hubs of gas surplus countries such as the US, Canada, and Russia.