New Delhi: India’s biggest explorer, Oil and Natural Gas Corp. Ltd (ONGC) increased profit 5.8%, beating estimates, after cutting discounts given to state refiners and selling crude oil closer to market prices.

Net profit rose to Rs5,090 crore in the three months to September from Rs4,810 crore a year earlier, the New Delhi-based company said in a statement to the Bombay Stock Exchange on Thursday. That’s more than the Rs4,920 crore median of 17 estimates compiled by Bloomberg.

The government reduced the amount of discounts ONGC had to give refiners, providing the explorer with more funds to invest in raising output from ageing domestic fields. ONGC has risen 74% in Mumbai trading this year after Prime Minister Manmohan Singh’s government pledged to lower its subsidy burden.

“Crude oil and oil sale prices are primary triggers," Vinay Nair, a Mumbai-based analyst with Khandwala Securities Ltd. “Cash flows will be maintained and that means they will be able to stick to their planned investments."

Discounts to state refiners fell to Rs2,630 crore in the quarter from Rs12,663 crore a year earlier, ONGC said. The government ordered the explorer to give discounts to the nation’s state refiners on petrol and diesel sales and exempted ONGC from compensating for losses on cooking fuels such as kerosene and liquefied petroleum gas.

Output at the company’s overseas fields may fall 9% this year, R.S. Butola, managing director of overseas unit ONGC Videsh Ltd, said on 9 June. Output may increase by 2012 when new fields including two in Myanmar start production, he said.