New Delhi: In what could be a grim indication of the year ahead, one of India’s most profitable companies by absolute numbers has said that its profit is likely to fall by 30%.
State-owned Oil and Natural Gas Corp. Ltd (ONGC), a Fortune 500 company, has told the government that its profit for the year 2009-10 will fall by at least Rs6,000 crore because of a precipitous drop in international prices of crude oil.
In choppy waters: An ONGC oil drilling facility at Bombay High. The bellwether company had estimated crude oil prices at between $50 and $70 a barrel, but the current levels are under $40. Bloomberg
Crude oil prices have dropped from $146 (Rs7,125 today) a barrel in July 2008 to $38 a barrel as on Wednesday. ONGC had estimated prices of between $50 and $70 a barrel, a senior company official, who didn’t want to be named because he isn’t authorized to talk to the media, told the Hindustan Times.
“It’s a global phenomenon, and it doesn’t apply only to ONGC,” said chairman and managing director R.S. Sharma.
“It’s only after seven-eight years that crude oil prices have seen such a sharp fall,” he said.
But the government is worried because ONGC is a bellwether company. “This is indeed a dramatic fall in the profit projections by ONGC,” said a senior Planning Commission member, requesting anonymity.
“Lower earnings by ONGC would also impact its tax payments. This is a cause of worry for North Block as ONGC is its major tax cow when it comes to corporate tax collections or payment of dividends.”
If crude oil prices rise again, ONGC’s profit estimates will climb too, but this is uncertain in a world beset by a worsening economic crisis.
For now, India’s public sector behemoth has had to revise its profit-after-tax estimate from Rs17,556 crore to Rs11,409 crore.