IOC and ONGC Q4 net profit plunges on subsidy load
New Delhi   31-May-2011

Public sector oil giants IndianOil (IOC) and ONGC on Monday both announced a decline in net profit for the fourth quarter ended March 31 as the subsidy burden on kerosene, LPG and diesel, which the two companies share with the government, went up.

IOC announced a 29.7 per cent decline in net profit for the fourth quarter as crude prices soared and the company had to sell petroleum products at prices fixed by the government.

“The company’s net profit in the January-March quarter came down to Rs. 3,905.16 crore from Rs. 5,556.77 crore in the same period last year,” IOC chairman R. S. Butola said.

IOC’s net profit fell to Rs. 7,445 crore in fiscal 2010- 11 from Rs. 10,221 crore in the previous year. ONGC reported a 26 per cent drop in its quarterly net profit to Rs. 2,791 crore, from Rs. 3,776 crore in the same period a year ago.

ONGC chairman and managing director (CMD) A. K. Hazarika said the company had to pay the highest ever Rs. 24,892 crore subsidy, half of it in Q4, by way of discounts on crude oil it sells to public sector refining companies, such as IOC. Till last year, ONGC and other upstream firms Oil India Ltd and GAIL met one- third of the loss retailers incurred on selling diesel, domestic LPG and kerosene at government controlled rates but in fiscal 2010- 11 the sharing has gone up to 38.8 per cent.

IOC had to absorb Rs. 4,845 crore of the subsidy burden on kerosene, LPG and diesel sales during fiscal 2010- 11 after it received Rs. 22,605 crore as compensation for the government’s share of the subsidy and a Rs. 16,704 crore discount on crude purchases from Indian upstream companies ONGC and OIL, which are also made to share the subsidy burden.

Butola said the company had to bear an under- recovery of Rs. 3,803 crore on diesel, LPG and kerosene sales during 2010- 11.