An additional subsidy outgo could dent ONGC's net profit for the 2010-11 fiscal by Rs 2,000 crore.

The company has been directed by the Government to shoulder additional subsidy burden to offset public sector oil retailers for the losses they incur in selling petroleum products below market price.

The Government has asked the upstream companies — ONGC, Oil India — and GAIL (India) Ltd to shoulder Rs 30,295.75 crore of the total estimated revenue loss of Rs 78,190 crore for 2010-11.

The ONGC Chairman and Managing Director, Mr A K Hazarika, said, “We have just been told that our (upstream) subsidy contribution for 2010-11 fiscal will be 38.7 per cent instead of one-third subsidy we had been sharing for past four years.”

ONGC will shoulder Rs 24,892.43 crore, while OIL will provide Rs 3,293 crore and GAIL Rs 2,111 crore for the last financial year. The upstream companies offer discounts on crude oil and products purchased by the retailers.

Mr Hazarika said: “Of this Rs 24,892.43 crore, we have paid Rs 12,757 crore. Approximately Rs 12,000 crore will be required to be paid now. This could impact our profit for 2010-11 by Rs 2,000 crore.”

However, ONGC's profitability will be more than Rs 16,768 crore it earned in 2009-10 fiscal, he said. “We made Rs 16,100 crore net profit in first nine months (for 2010-11) and for the full fiscal we will do better than last year,” Mr Hazarika said.

In 2009-10, ONGC's net realisation on every barrel of crude oil sold was $55.94. This year, net realisation was expected to touch $59. However, it could come down to $54/barrel or so, the ONGC Director - Finance, Mr D.K. Sarraf, said.

This could also have an impact on ONGC's proposed follow-on public offer, industry watchers say.

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