Indian Oil Corp (IOC) has overtaken Oil and Natural Gas Corp (ONGC) to become India’s most profitable state-owned company. IOC, which has for decades been India’s biggest company by turnover, posted a 70 per cent jump in net profit to Rs 19,106.40 crore in the financial year ended March 31, 2017. This was more than the Rs 17,900 crore net profit ONGC posted in the 2016-17 fiscal, making IOC the most profitable PSU, according to earning statements of the companies.
Billionaire Mukesh Ambani-led Reliance Industries retained the crown of being India’s most profitable company for the third year in a row, posting a net Rs 29,901 crore in financial year 2016-17. Tata Consultancy Services, India’s largest software services exporter, with a net profit of Rs 26,357 crore was the second most profitable company in the country.
ONGC was long India’s most profitable company but lost the crown to private sector Reliance and TCS a couple of years back. It has now been unseated as the most profitable PSU by IOC. In the previous 2015-16 fiscal, IOC had a net profit of Rs 11,242.23 crore as compared to ONGC’s Rs 16,140 crore.
While IOC Chairman B Ashok attributed the profit growth to higher refining margins, inventory gains and operational efficiencies, ONGC Chairman and Managing Director Dinesh K Sarraf said the company lost Rs 3,000 crore in net profit due to government’s natural gas pricing policy that has made the business economically unviable.
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The BJP-led government had in October 2014 evolved a new pricing formula using rates prevalent in gas surplus nations like the US, Canada and Russia to determine rates in a net importing country. Prices have halved to USD 2.48 per million British thermal unit since the formula was implemented.
Sarraf said the company lost Rs 5,010 crore in revenue on natural gas business from 35 per cent drop in gas prices in last one year. “Our profit would have been about Rs 3,000 crore higher if we got remunerative gas price,” he said. “Natural gas is no more profitable business because cost of production is very very significantly higher than current gas prices,” he said.
Oil Minister Dharmendra Pradhan in a written reply to a question in Lok Sabha on March 20 had stated that the cost of production of natural gas in the prolific Krishna Godavari basin is between USD 4.99 per mmBtu and USD 7.30 per mmBtu.
The same for other basins is in the range of USD 3.80 per mmBtu to USD 6.59 per mmBtu, he had said, adding the production costs of companies vary from field to field depending upon size of the reservoir, location, logistics and availability of surface facilities. ONGC is the country’s biggest gas producer, accounting for some 80 per cent of the 70 million standard cubic meters per day current output.