The Hindu Business Line : ONGC profits may take a hit in second quarter

ONGC's profit growth may fall in the second quarter compared to the first if asked to share as big a chunk of the subsidy as it did in the first quarter.

The company is, however, expecting the annual subsidy to be lower than the Rs 12,000-crore recently mooted by the Government.

The exploration and production major registered 43 per cent rise in net profit in the first quarter of 2005-06 from Rs 2,308 crore (in the first quarter of 2004-05) to Rs 3,318 crore. This was after sharing a mammoth Rs 2,860 crore subsidy to the oil marketing companies.

The subsidy bill for the first quarter was almost 70 per cent of the Rs 4,104 crore subsidy paid for the full year of 2004-05.

Informed sources told Business Line that the company's revenues had taken a beating owing to the production loss following the fire at Mumbai High North oil field on July 27.

Though gas production has hit normal levels recently, oil production has reached only 70 per cent of the previous average output of one lakh barrels a day. Full production from the field is expected to be restored at the end of this fiscal.

"Keeping the production loss in mind, we feel we may not be able to repeat the performance of the first quarter when profits rose handsomely even after a manifold rise in the subsidy burden," sources pointed out. "If asked to pay as much subsidy as in the first quarter, we may end up only with a marginal (compared to 43 per cent rise in Q1) growth in profits".

On the subsidy sharing arrangement for the year, which is now under discussion, the sources said that out of a projected under-recovery of Rs 40,000 crore, Rs 22,000 crore would be adjusted through oil bonds (Rs 12,000 crore, inclusive of the Rs 5,700 crore of bonds issued against the APM era oil pool account), impact of two rounds of price revision (Rs 5,500 crore) and discounts offered by the stand-alone refineries (Rs 5,000 crore).

This leaves the Government with a net deficit of Rs 18,000 crore to be shared by the upstream companies (including ONGC, GAIL and OIL) and oil marketing companies.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page