State-owned Oil and Natural Gas Corporation (ONGC) has reported a 24.5 per cent drop in its net profit for the first quarter ending June 30, 2010. ONGC's net profit for the April-June quarter stood at Rs 3,661 crore as against Rs 4,848 crore in the corresponding period of the last fiscal.
"Excessive subsidy discounts led to the fall in the company's profit during the first quarter of the fiscal," said R.S. Sharma, chairman and managing director ONGC.
"What is required is a well defined equitable mechanism for subsidy discounts. This would ensure much higher commercial values," he added.
The company's statement said ONGC offered a gross discount of Rs 5,515 crore on sales of crude to the state-owned oil companies. The impact of this subsidy on the company's net profit after tax during the quarter was Rs 3,119 crore against Rs 241 crore in the corresponding period last year.
ONGC is required to partially subsidise the sale of fuel to staterun retailers, who sell fuel at government-set, below-market prices, which affects its profit.
The government recently deregulated petrol prices and said it would free diesel prices as well, but clarity on the subsidy-sharing mechanism for other fuels has still not emerged.