New Delhi, May 27: The slump in natural gas prices has hit state-owned explorer ONGC Ltd hard. The company lost Rs 5,010 crore in revenue from the natural gas business and about Rs 3,000 crore in profit in the last one year because of the price dip.

"Natural gas is no more a profitable business because the cost of production is significantly higher than current gas prices," ONGC chairman and managing director Dinesh K. Sarraf said.

ONGC yesterday reported a 6 per cent drop in quarterly profit despite a 33.7 per cent increase in gross revenue.

In October 2014, the BJP-led government had evolved a new pricing formula using the rates prevalent in gas surplus nations such as the US, Canada and Russia to fix the rates in a net importing country. Prices have halved to $2.48 per million British thermal unit (mBtu) since the formula was implemented.

It is not commercially viable for a company to invest in new fields or raise output through fresh investments if the price it gets is below the cost of production.

Sarraf said the price paid to domestic producers was less than half the rate paid for the import of gas (LNG).

India imports half of its natural gas needs and Prime Minister Narendra Modi is keen on cutting the import bill by raising local production.

ONGC, Sarraf said, has sought a review of the natural gas pricing formula. "We have no reason to disbelieve that gas prices will not be raised," he said. The company wants the floor or minimum price of natural gas to be fixed at $4.2 per mBtu.

Oil minister Dharmendra Pradhan, in a written reply to a question in the Lok Sabha, had stated that the cost of production of natural gas in the prolific Krishna-Godavari basin is between $4.99 per mBtu and $7.30 per mBtu.

The same for other basins is in the range of $3.80 per mBtu to $6.59 per mBtu, he had said, adding the production cost varies across fields, depending on the size of the reservoir, location, logistics and availability of surface facilities.