State-owned Oil and Natural Gas Corporation (ONGC) on Monday reported a 34 % drop in the June quarter net profit, the fourth straight quarterly decline, on back of high fuel subsidy payout.
Net profit in April-June fell 33.92 % to Rs 4,015.98 crore from Rs 6,077.70 crore in the same period a year ago, ONGC Director (Finance) AK Banerjee told reporters in Delhi.
ONGC sells crude to state refiners at a discount to partly compensate them for selling diesel and cooking fuel below cost.
It paid 2.2 % more subsidy at Rs 12,622 crore in April-June despite fuel retailers revenue losses on diesel, cooking gas (LPG) and kerosene declining 43 % to Rs 25,579 crore.
The subsidy payout in first quarter ended June 30 compared to Rs 12,346 crore in same quarter last fiscal.
Banerjee said the subsidy payout lowered net profit by Rs 7,131 crore which otherwise would have been invested in exploring for more oil and gas within the country and acquiring assets abroad.
Subsidy payments are likely to result in reduction of ONGC's cash balance. ONGC's net cash declined 16 % to Rs 13,200 crore on March 31 from Rs 15,500 crore on April 1, 2012. It will drop further this year as the company continues to sell crude at a discount and sets aside Rs 1,100 crore for workers retirement benefits.
ONGC has foregone Rs 90,500 crore of profit in the last five years.
Banerjee said profits were also lower because of the one-time charge towards employee pension benefits.
Turnover was marginally lower at Rs 19,308.93 crore in first quarter compared to Rs 20,177.78 crore a year ago.
Revenues were lower because the company realised lesser price for crude oil it sold, he said, adding that production increased to 6.025 million tonnes from 6.007 million tonnes.
ONGC sold crude oil at $ 102.90 per barrel in Q1 but after giving subsidy discounts the net realisation was $ 40.17, Banerjee said.
This compared to net realisation of $ 45.91 per barrel a year ago.
The government mandates that Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum sell diesel, cooking gas (LPG) and kerosene at rates lower than their cost of production. The difference between the cost and sale price is partly compensated by the government by way of cash subsidy while a large part of it comes from upstream firms like ONGC.
In April-June period, the three retailers lost Rs 25,579 crore in revenue. Of this, the government has agreed to provide Rs 8,000 crore as cash subsidy, way short of the Rs 11,451 crore that the oil ministry had sought.