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Business News/ Companies / ONGC to pay `13,764 crore as fuel subsidy in Q3
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ONGC to pay `13,764 crore as fuel subsidy in Q3

Company says a higher subsidy in the December quarter will further dent its profitability

The oil ministry this week asked ONGC and Oil India to give `15,937.59 crore to make up for 40% of the `39,725 crore revenue that retailers lost. Photo: Amit Dave/ReutersPremium
The oil ministry this week asked ONGC and Oil India to give `15,937.59 crore to make up for 40% of the `39,725 crore revenue that retailers lost. Photo: Amit Dave/Reuters

New Delhi: The government has ordered Oil and Natural Gas Corp. Ltd (ONGC) to pay a near-record 13,764 crore as fuel subsidy for the December quarter, a move that will dent the firm’s profitability. Oil and gas producers ONGC and Oil India Ltd (OIL) bear a portion of the losses that fuel retailers incur on selling some fuels at subsidized rates.

The government also offers the oil refiners a cash subsidy as compensation. The oil ministry this week asked ONGC and OIL to give 15,937.59 crore to make up for 40% of the 39,725 crore revenue that retailers lost on selling diesel, domestic LPG and kerosene at government-controlled rates in the October-December quarter, people familiar with the matter said.

It expects the finance ministry to compensate for the remainder by way of a cash subsidy. ONGC’s share of the burden will be 13,764.11 crore, while OIL will bear 2,173.48 crore. Gas utility GAIL (India) Ltd will not pay any subsidy in Q3. ONGC’s liability is near the record 13,796.04 crore that the firm had to shell out in Q2.

People familiar with the matter said the share of Indian Oil Corp. Ltd (IOC) in the support provided by the two exploration companies would be 8,261.30 crore. Bharat Petroleum Corp. Ltd (BPCL) would get 3,971.31 crore and Hindustan Petroleum Corp. Ltd (HPCL) the remaining 3,704.98 crore.

During April-September, retailers IOC, BPCL and HPCL together lost 60,907 crore in revenue on selling diesel and cooking fuel. Of this, ONGC made 26,417.82 crore, OIL 4,215.76 crore and GAIL 1,400 crore. The government provided 17,772 crore. The unmet revenue loss in H1 was 11,101.42 crore.

People familiar with the development said ONGC’s subsidy burden in Q3 would be 10% higher than the 12,433 crore paid in the same period of the previous financial year. The company says its subsidy outgo of about 26,418 crore in April-September had dented net profit by 14,752 crore and a higher subsidy in the December quarter would further dent its profitability. ONGC had reported a net profit of 10,080 crore in H1.

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Published: 28 Jan 2014, 03:42 PM IST
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