BackONGC sees new subsidy rules boosting Q1 profit
ONGC reported net profit down nearly a fifth from a year earlier to Rs3,935 crore in its fiscal fourth quarter to 31 March
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New Delhi: India’s top energy explorer Oil and Natural Gas Corp (ONGC) said on Thursday it expects current-quarter profit to be boosted by an interim rule change on discounts offered by upstream oil companies to state retailers.
ONGC, majority-owned by the government, reported net profit down nearly a fifth from a year earlier to Rs3,935 crore ($616 million) in its fiscal fourth quarter to 31 March, missing analysts’ estimates averaging 5,491 crore.
India keeps a lid on retail prices of liquefied petroleum gas and kerosene to tame inflation, with upstream companies such as ONGC and Oil India offering discounts on crude sales to help cut the losses of state refiners.
For the June quarter, the oil ministry has set interim rules to exempt upstream state firms from giving any discounts on crude and refined fuels if global oil prices average up to $60 a barrel this quarter.
Asked if that would help his company post a higher profit for the quarter, ONGC Chairman D.K. Sarraf said: “Definitely yes, because I am assuming a price of at least $60 internationally which is very good."
Brent crude oil prices are currently hovering around $61 a barrel.
For prices above $60 a barrel the companies will have to give a discount of 85% of the incremental oil price increase and the discount will rise to 90% for prices beyond $100 a barrel.
ONGC did not have to pay any discount in the March quarter as crude prices fell sharply and the government was working on new subsidy rules as part of broader reforms in the sector. Still, its net profit was lower than a year earlier due to higher costs and tax outgoings.
The Indian government wants to take ONGC’s overseas arm, ONGC Videsh, public, a company executive who did not want to be named, told reporters earlier on Thursday. He added, however, that ONGC would favour delaying a listing given the current low oil price.
The government also wants to sell shares in ONGC and biggest fuel refiner India Oil Corp to raise about a third of its budget target for asset sales of $11 billion — and reduce its fiscal deficit to 3.9% of GDP in the 2015/16 fiscal year. It had to defer plans to sell a 5% stake in ONGC last year as investors wanted clarity on subsidy payments.
Ahead of the results, shares in ONGC ended 1.2% down in a Mumbai market that fell 0.2%. Bloomberg
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