The earning of oil & gas producing companies like ONGC, Reliance Industries, and Oil India would be impacted by the price cut of domestically produced natural gas, said Dipak Mahurkar, director (Oil & Gas Practice), PwC India.
The price domestically produced gas was on Tuesday cut by 8 per cent to $5.18/mmbtu on a net heat value basis. The revised prices will be effective for April-September period.
The government had last year notified a formula under which gas prices would be revised every six months based on prices at various international hubs.
Mr Mahurkar believes that the gas price reduction based on the current formula may become a cause of worry for these Indian gas producers if global prices continue to plunge. "The companies will start getting worried about it as their cost of production of gas is higher than the global average," he added.
But ONGC and Oil India could be cushioned from the blow of lower gas prices because falling crude prices would reduce the subsidy burden of these state-owned companies, thereby negating the impact of fall in revenue due to reduced gas prices, said Mr Mahurkar.
The government is likely to exempt oil producers ONGC and Oil India from payment of fuel subsidy in the fourth quarter ending March 31, a senior Petroleum Ministry official said recently.
Under-recoveries, or oil retailers' loss on selling fuel below cost, are projected to be Rs 74,773 crore in the 2014-15 fiscal. Of this, Rs 67,091 crore has already been accounted for in the first nine months of the fiscal.
(With agency inputs)
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
