ONGC, India’s largest oil and gas explorer, has reported a 40 per cent drop in its fourth quarter 2012-13 net profit compared with the similar period last year. This has come as a surprise to most industry watchers, as the subsidy burden of the upstream company was lower during the quarter. The lower profit is due to ONGC bearing more expenses on statutory levies, higher operating costs due to rupee-dollar fluctuations, dry wells (failed exploration) and depletion costs, among others.
ONGC reported profit after tax of Rs 3,387 crore (Rs 5,644 crore). Sales rose 14 per cent to Rs 21,389 crore (Rs 18,819 crore). Most analysts had estimated a Rs 4,500 crore net profit for ONGC.
During Q4 FY13, the company shelled out Rs 12,312 crore (Rs 14,170 crore) to compensate Government-owned oil marketing companies for selling fuel below market cost.
“The subsidy sharing mechanism hurts our investment plans,” said the ONGC Group Chairman, Sudhir Vasudeva. “It also impacts our cost of production.”
Some of the additional costs that pushed ONGC’s Q4 net profit down include Rs 1,043 crore statutory levies, Rs 698 crore as operating cost because of depreciating rupee against the dollar, Rs 1,145 crore on dry wells, Rs 761 crore for impairment and depletion and Rs 606 crore as provisioning to be received from oil marketing companies.
Annual profit down
For fiscal 2012-13, ONGC’s profit after tax dropped 16.7 per cent to Rs 20,926 crore owing to the higher subsidy burden shared by the company. The Maharatna’s turnover rose 8.4 per cent to Rs 82,552 crore.
The explorer paid Rs 49,421 crore in 2012-13 against Rs 44,466 crore last year to meet losses incurred by oil marketing companies. But for this record subsidy outgo, net profit should have risen by Rs 28,413 crore, Vasudeva said.
“Last year, we had a one-time gain of Rs 3,141 crore after Cairn India agreed to reimburse cess and royalty that ONGC pays on crude oil produced from its Rajasthan block,” he added. ONGC plans to invest Rs 35,049 crore in 2013-14, up from Rs 29,503 crore in the previous fiscal. siddhartha.s@thehindu.co.in