The government has ordered Oil and Natural Gas Corporation (ONGC) to pay a record Rs 13,796 crore
fuel subsidy for the July-September quarter, a move which will dent the PSU's profitability.
Retailers like Indian Oil Corp (IOC) 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.
The Oil Ministry on October 31 issued orders asking upstream oil and gas producers like ONGC and Oil India Ltd (OIL) to give Rs 16,729.74 crore to make up for 47 per cent of the Rs 35,328 crore 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.
Of the Rs 16,729.74 crore that upstream firms have been asked to pay for Q2, ONGC's share will be Rs 13,796.04 crore while OIL will bear Rs 2,233.70 crore. Gas utility GAIL will pay Rs 700 crore, he said.
The subsidy ONGC has been asked to pay is 11.9 per cent more than Rs 12,330 crore fuel subsidy outgo in July-September quarter of 2012. It is also 9.3 per cent more than Rs 12,622 crore payout in Q1 of current fiscal.
ONGC sources said the
company's profitability was impacted by Rs 7,131 crore 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. Margins have already narrowed to a four-year low due to subsidy payouts.
Of the Rs 16,729.74 crore that upstream firms will pay, IOC will get Rs 8,634.14 crore while Hindustan Petroleum Corp will get Rs 3,908.97 crore. Bharat Petroleum Corp Ltd will get the remaining Rs 4,186.63 crore.
Fuel retailers had in Q1 of current fiscal lost Rs 25,579 crore on sale of diesel and cooking fuel. Of this Rs 15,303.84 crore came from upstream firms (ONGC Rs 12,621.78 crore, OIL Rs 1,982.06 crore and GAIL Rs 700 crore).
Finance Ministry paid Rs 8,000 crore cash subsidy, leaving Rs 2,275.16 crore uncovered, the official said adding the oil ministry seek this uncovered sum plus Rs 18,598.26 crore as subsidy support for Q2.
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