State-owned Oil & Natural Gas Corporation (ONGC) today reported a 34 per cent drop in the June quarter net profit mainly due to impact of subsidy it pays so that diesel and cooking fuel can be sold at subsidised rates.
Net profit in April-June fell 33.92 per cent to Rs 4,015.98 crore from Rs 6,077.70 crore in the same period a year ago.
Turnover was marginally lower at Rs 19,308.93 crore in first quarter as compared to Rs 20,177.78 crore a year ago.
ONGC paid Rs 12,622 crore subsidy in April-June by way of discounts on crude oil and LPG it sells to fuel retailers. This compared to Rs 12,346 crore in same quarter last fiscal.
The company said the subsidy payout impacted net profit by Rs 7,131 crore.
Government forces Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum to 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 Rs 11,451 crore that the Oil Ministry had sought.
Upstream oil firms like ONGC, Oil India Ltd (OIL) and GAIL India Ltd will bear Rs 15,303.84 crore and the rest would be borne by fuel retailers.
Depreciating rupee has resulted in widening losses on fuel sales and oil firms are currently losing Rs 9.29 per litre on diesel, Rs 33.54 a litre on kerosene and Rs 412 per 14.2-kg LPG cylinder.
ONGC chipped in with Rs 12,621.78 crore, OIL Rs 1,982.06 crore and GAIL Rs 700 crore to make up for bulk of fuel losses in the April-June period.
ONGC shares were up 1 per cent on closing.