30 May 2014, News Wires – India’s Oil & Natural Gas Corporation posted a 44% rise in quarterly profit but fell short of expectations, hurt by government-imposed discounts on its crude sales to state-run refiners.
India regulates prices of liquefied petroleum gas, kerosene and diesel to keep them in check for the masses, with producers such as ONGC sharing the cost of subsidising state refineries by selling to them at a discount.
However, a higher burden from these subsidised sales has squeezed ONGC’s margins as it continues an investment programme to boost its overseas interests and maintain output at its ageing domestic fields, according to a Reuters report.
The company’s net oil sales billing plunged to an eight-year low of $40.97 a barrel in its 2013-14 financial year, from $47.85 a barrel the previous year, the news wire said.
The cost to ONGC of helping to subsidise domestic fuel prices rose 14% to 563.84 billion Indian rupees ($9.55 billion) in the year to 31 March.
Finance director Aloke Banerjee told reporters that the impact of the higher subsidy costs had been restricted by a drop in spending on the drilling of dry wells and by the rupee’s decline against the US dollar.
A fall in the value of the rupee helps ONGC because it bills oil sales in dollars.
The state-run company reported a net profit of 48.89 billion rupees in quarter to 31 March, up from 33.89 billion rupees a year earlier. Net sales fell 2% to 208.81 billion rupees.
Analysts, on average, expected a net profit of 57.27 billion rupees, according to Thomson Reuters StarMine data.