ONGC profit falls as subsidy costs weigh

NEW DELHI Thu Nov 8, 2012 8:37pm IST

A technician works inside the Oil and Natural Gas Corp (ONGC) group gathering station on the outskirts of Ahmedabad March 2, 2012. REUTERS/Amit Dave/Files

A technician works inside the Oil and Natural Gas Corp (ONGC) group gathering station on the outskirts of Ahmedabad March 2, 2012.

Credit: Reuters/Amit Dave/Files

Related Topics

Stocks

   

NEW DELHI (Reuters) - State-run producer Oil & Natural Gas Corp.'s (ONGC.NS) quarterly profit dropped more than 30 percent because of a sharp rise in the discount it has to give state refiners even as crude prices fell.

ONGC, India's third-biggest company by market value, is forced to subsidise state refineries by selling them crude cheaply so they can supply retail markets at capped prices. The government increased the discount that crude oil suppliers have to give refiners earlier this year.

ONGC's cash could be depleted rapidly if the subsidy stayed at the same level, top officials warned.

"We are only meeting our day-to-day operations," Chairman Sudhir Vasudeva told reporters on Thursday. "This is a matter of concern because our cost of production is increasing."

Net profit fell to 58.97 billion rupees for the second quarter ended September from 86.42 billion rupees in 2011. Analysts had expected net profit of nearly 61 billion rupees, according to a Reuters poll of brokerages.

The cost of the subsidy more than doubled to 123.30 billion rupees while the amount ONGC gets paid per barrel of crude fell to $46.8 per barrel from $82.6 a barrel a year ago.

ONGC needs more than $60 per barrel to fund planned expenditure, Vasudeva said.

ONGC has been investing to maintain output from its old fields and has capital spending plans of around 340 billion rupees both this year and next. It has also been scouting for assets abroad, under pressure from the government to meet rising demand from an economy expected to grow 6.5 percent in 2012.

Shares in ONGC, valued at nearly $42 billion, closed 0.6 percent lower on Thursday, ahead of the results. The stock has risen about 3.5 percent so far in 2012, underperforming a 10.2 percent rise in the sectoral index.

(Reporting by Nidhi Verma and Prashant Mehra; Editing by Matthew Tostevin)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Shares Hit Record

Sensex, Nifty rise to second consecutive record high

Sensex surges 500 points on BOJ easing, L&T gains

The BSE Sensex and Nifty surged to record highs for a second consecutive session on Friday after Bank of Japan's surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows, boosting blue-chips such as Larsen & Toubro.  Full Article 

REUTERS SHOWCASE

Wilful Negligence?

Wilful Negligence?

SEBI piles pressure on Sahara to sell overseas hotels  Full Article 

Indian Economy

Indian Economy

India's fiscal deficit in H1 almost 83 pct of full-year target.  Full Article 

M&M Earnings

M&M Earnings

M&M Q2 net profit down 4 percent, hit by poor monsoon.  Full Article 

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 

Commodities

Commodities

Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage