By IANS,
New Delhi : India’s largest oil producer Oil and Natural Gas Corp recorded 5.7 percent fall in net profit in the second quarter this fiscal, due to a two-fold jump in its outgo on fuel subsidies.
“How could the subsidy burden behave so erratically,” ONGC chairman R.S. Sharma asked Thursday after the ONGC board met to discuss the company’s financial performance.
ONGC posted a profit after tax of Rs.48.08 billion (about $1.07 billion) in the second quarter, down from Rs.50.98 billion in the corresponding quarter last fiscal.
The subsidy burden for the quarter stood at Rs.126.6 billion, 233 percent up from the subsidy load of Rs.32.99 billion in the year-ago period.
The subsidy amount for the first quarter of 2008-09 amounted to Rs.98.11 billion.
As per the government formula, while half of the under-recoveries of the three oil-marketing companies is met through oil bonds, upstream companies, mainly ONGC, are supposed to make contributions to cover 33 percent of the losses.
However, ONGC usually has to dole out more money than its share.
Asked how much ONGC’s contributions will cover the subsidy burden in the second quarter, Sharma said: “I have no idea.”
“As far as I know, there is no formula (now),” he added, appealing to the government to stop taking such ad-hoc decisions.
He further reiterated the urgency for an equitable and defined mechanism on subsidy discounts.
On the brighter side, the Fortune 500 company reported a year-on-year growth of 13.1 percent in total sales, grossing Rs.179.42 billion over last year’s Rs.154.64 billion.
During the first six months this fiscal, revenue has increased 28.9 percent to Rs.291.9 billion, while net profit has increased 17.9 percent to Rs.97.08 billion.
The subsidy burden for the last six months increased 201.7 percent to Rs.224.7 billion over the corresponding period last year.
ONGC’s net realisation per barrel has also dipped sharply in the second quarter due to the subsidy burden.
While the price for ONGC’s crude was $119.39 a barrel, the company only earned $46.72 per barrel after the subsidy discount. Last year, the pre-discount price was $78.24, while ONGC got $56.14 for each barrel.
This increased in the first quarter of 2008-09, when ONGC posted a net realisation of $69.14 per barrel.
The ONGC board has approved the setting up of an additional processing unit at Uran, near Mumbai, at a cost of Rs.17.87 billion.