ONGC SEEKS FULL AU­TON­OMY ON GAS PRIC­ING

DEREG­U­LA­TION WILL BOOST LO­CAL OUT­PUT, CRE­ATE A VI­BRANT NAT­U­RAL GAS MAR­KET: CHAIR­MAN SAR­RAF

Resource Digest - - RESOURCE DIGEST -

State-run Oil and Nat­u­ral Gas Cor­po­ra­tion (ONGC) is seek­ing to­tal pric­ing free­dom for nat­u­ral gas pro­duced in the coun­try, ar­gu­ing it would help boost lo­cal out­put and de­velop In­dia into a vi­brant gas mar­ket.

“We are mak­ing the case be­fore the gov­ern­ment that the gas prices could be dereg­u­lated,” Chair­man Di­nesh Sar­raf said in an in­ter­view. “Some reg­u­la­tory mech­a­nism can be put in place to pro­tect the in­ter­est of the con­sumers. But let the prices be dereg­u­lated. Let it be de­ter­mined by the buy­ers and sell­ers col­lec­tively through the mar­ket forces.”

With this ONGC has given a new thrust to the de­mand from Reliance In­dus­tries, BP Plc, and other pri­vate sec­tor gas pro­duc­ers in the coun­try to free up pric­ing. The gov­ern­ment has kept a lid on prices through a for­mula worked out two years ago that aligns lo­cal with in­ter­na­tional rates, and a gas al­lo­ca­tion pol­icy that pri­ori­tises sec­tors for re­ceiv­ing lo­cal sup­ply. The gov­ern­ment has al­lowed pric­ing free­dom to gas blocks that will be auc­tioned un­der new ex­plo­ration and pro­duc­tion poli­cies.

Sar­raf said “the point has been made in brief “to the gov­ern­ment and a de­tailed note would soon be sent. He said he was op­ti­mistic the gov­ern­ment would con­sider the com­pany's plea of pric­ing free­dom be­cause the com­pany's aim be­hind this was to help raise do­mes­tic gas out­put, the same as that of the gov­ern­ment.

A few months back, ONGC had also writ­ten to the gov­ern­ment that a floor price be fixed for the do­mes­tic prices.

“The mar­kets are what they are and prices are com­ing down. And price which we get to­day is $2.5 only. So we be­lieve that gov­ern­ment needs to re­con­sider this be­cause new ex­plo­ration and de­vel­op­ment can get en­cour­aged if prices are bet­ter. So we have taken up the mat­ter with the gov­ern­ment,“said Sar­raf.

Do­mes­tic gas prices have halved to $2.5 unit in two years, track­ing global de­cline, drop­ping lower than ONGC'S av­er­age gas pro­duc­tion cost of $3.5unit. ONGC loses `4200 crore in rev­enue and `2400 crore in profit an­nu­ally for each dol­lar's drop in lo­cal gas price.

“Ul­ti­mately we want higher dol­lars. If it is a for­mula or a price, that they (gov­ern­ment) will decide,“sar­raf said. He added that “If gas prices are in­creased in gen­eral, many of the gas dis­cov­er­ies which are not other­wise vi­able would be­come vi­able.”

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