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The government has ordered Oil and Natural Gas Corporation to pay a record Rs 13,796-crore (Rs 137.96-billion) fuel subsidy for the July-September quarter, a move which will dent ONGC's profitability.
The Oil Ministry on October 31 issued orders asking upstream oil and gas producers like ONGC and Oil India Ltd to give Rs 16,729.74 crore (Rs 167.29 billion) to make up for 47 per cent of the Rs 35,328-crore (Rs 353.28 billion) revenue that retailers lost on selling diesel, domestic LPG and kerosene at government controlled rates in second quarter.
It is expecting the Finance Ministry to make up for the remaining by way of cash subsidy, a top official said. Retailers like Indian Oil Corporation sell diesel and cooking fuel at rates which are way below cost.
The losses they incur are met by government cash subsidy as well as through support from upstream firms. Of the Rs 16,729.74 crore (Rs 167.29-billion) that upstream firms have been asked to pay for Q2, ONGC's share will be Rs 13,796.04 crore (Rs 137.96 billion) while OIL will bear Rs 2,233.70 crore (Rs 22.33 billion).
Gas utility GAIL will pay Rs 700 crore (Rs 7 billion), he said.
The subsidy ONGC has been asked to pay is 11.9 per cent more than Rs 12,330-crore (Rs 123.3-billion) fuel subsidy outgo in July-September quarter of 2012. It is also 9.3 per cent more than Rs 12,622-crore (Rs 126.22-billion) payout in Q1
ONGC sources said the company's profitability was impacted by Rs 7,131 crore (Rs 71.31 billion) because of the subsidy in Q1 and a higher subsidy in September quarter would severely dent its profitability.
The company's net profit fell 33.92 per cent in April-June to Rs 4,015.98 crore (Rs 40.15 billion).
Margins have already narrowed to a four-year low due to subsidy payouts.
Fuel retailers had in Q1 of current fiscal lost Rs 25,579 crore (Rs 255.79 billion) on sale of diesel and cooking fuel.
Of this Rs 15,303.84 crore (Rs 153.03 billion) came from upstream firms (ONGC Rs 12,621.78 crore or Rs 126.21 billion, OIL Rs 1,982.06 crore or Rs 19.82 billion and GAIL Rs 700 crore or Rs 7 billion). Finance Ministry paid Rs 8,000-crore (Rs 80-billion) cash subsidy, leaving Rs 2,275.16 crore (Rs 22.75 billion uncovered, the official said adding the oil ministry seek this uncovered sum plus Rs 18,598.26 crore (Rs 185.98 billion) as subsidy support for Q2.
Of the Rs 16,729.74 crore (Rs 167.29 billion) that upstream firms will pay, IOC will get Rs 8,634.14 crore (Rs 86.34 billion) , while Hindustan Petroleum Corp Ltd will get Rs 3,908.97 crore (Rs 39.08 billion).
Bharat Petroleum Corp Ltd will get the remaining Rs 4,186.63 crore (Rs 41.86 billion).
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