The Hindu Business Line : FY06 subsidy burden seen at Rs 12,000 cr: Raha

THE ONGC Chairman and Managing Director, Mr Subir Raha, says that their FY06 subsidy burden is seen at Rs 12,000 crore. He feels that unpredictable policies will pose further problems.

Excerpts from CNBC-TV18's exclusive interview with Mr Raha:

Could you just start with your average selling price and realisations that you notched in this quarter in reference to what happened with crude?

Subsidy burden came to a discount of $16.5 per barrel for the last quarter. The price realisation was about $42-43 per barrel. Besides that, due to the low cost sales formula that we have we have already given about $3-5 per barrel as a part of agreed advantage to the buyers. So if we take both together, we took a hit of more than $20 per barrel on crude that we produce.

How much did ONGC end with in-terms of a subsidy burden for the full year?

Up to Q3, it has almost been Rs 9,000 crore and the prices are holding firm because of severe winter. So, on a proportionate basis it should be around Rs 12,000 crore or more for the year. It was Rs 3,000 crore for the entire year in 2004-05, which is almost four times increase in the subsidy burden.

Do you think this is the kind of discount that you will have to offer in your selling prices; $20-22 consistently below the international crude price?

Well that is what is happening now. I am also looking forward to the review of pricing policy after the Government's decision on that. The problem is total unpredictability, because we just get a subsidy burden advice only once in a quarter. It is very difficult to plan when we do not know our topline, so how do we plan anything in the company.

Is there any possibility that you may retract or withdraw some of that $3-5 discount, which could be a windfall to your bottomline?

Sure. We have discussed that mechanism over the last couple of years with the (Petroleum) Ministry. We have reached an in-principle agreement of the revised approach. I am waiting for the Ministry to take a call or a decision on that. That would certainly help because this $3-5 is unseen; it is just taken for granted. But when we talk about producing 27-28 million tonnes a year multiplied by $5 a barrel, it is big.

Just a word on your inorganic moves?

We have completed due diligence on SPIC and Tidewater. Now, I think at the management level and board level, we need to take a call, which we propose to do in February.