From April 1 onwards, there will be a hit on the revenues: AK Srinivasan, ONGC

In a chat with ET Now, AK Srinivasan, Director-Finance, ONGC, says the impact of the price cut would be about Rs 4000 crore plus on a yearly basis



ET Now: I start off with this premise that this not a surprise, everybody knew this were to happen and it has happened. What kind of an impact do you think lower gas prices have for companies in the space?

AK Srinivasan: Definitely the lower gas prices are going to impact the revenues for the current year and this formula going forward will be applicable for six months and looking at the trends of the gas prices going downward, this will definitely have an impact on the organisation.

ET Now: A very basic ballpark, back of the envelope numbers show 50 cents drop in realisation. How much of that will hit your profitability and revenue?

AK Srinivasan: On a one dollar change on any gas price, the overall impact is about Rs 4000 crore plus on my total revenue on the volumes as we have been doing in the last couple of years. So based on that volume it is about Rs 4000 crore for the one year period revenue.

ET Now: Do you sense that the point that you were just trying to make right now that this could be a long haul scene and that in the next revision also we would see a cut?

AK Srinivasan: We cannot say so immediately because the gas pricing is linked to the Canadian market, the UK and Russian markets. These are the four markets under which the average of the prices for a one year forward is taken into account. We cannot predict right now but definitely from 1st April onwards, there will be a hit on the revenues.

ET Now: What is your assumption for crude going forward and would you make the base case that $40 is going to be the new normal or do you think the prices would appreciate from here?

AK Srinivasan: Over a period of time, crude prices have gone up and down. We assume this should be the trend to look forward to.