In line with the trend of the last few years, ONGC’s cash reserves depleted by another 24% to around Rs 10,000 crore by the end of FY14 from the level a year ago, sources privy to the matter said. This was even as the state-run firm squeezed capital spending for the year by about 15% from the planned Rs 35,000 crore and just Rs 3,200 crore from the reserves were used for exploration/production expenditure.
The reduction in the cash position was also due to an outgo of Rs 4,000 crore to convert some unfunded liabilities — in relation to leave encashment and post-retirement benefits to employees — into funded liabilities, the sources added.
ONGC’s cash reserves stood at a record Rs 25,000 crore at the end of FY11.
The state-run firm, shouldering much of the responsibility of India’s energy security, has in the last couple of years been very vocal about the subsidy burden on it being backbreaking and increasingly a threat to its exploration plans. Having to make good close to 43-44% of the oil marketing companies’ under-recoveries, ONGC’s net realisation from the principal business of sale of crude oil has hovered around a measly $2-3/barrel in FY14. The company had consistently sought respite from this but a fiscally stressed government could not oblige.
“We have done nearly 85-90% of the total capital expenditure programme. Otherwise, the cash balance would have dipped further by R1,500-2,000 crore,” a senior official in the company told FE.
ONGC is expected to declare its fourth quarter and annual results by end of this month. The Maharatna company, according to IDFC, might have posted a net profit of R5,554 crore on Ebitda of about R10,9406 crore in last quarter of last fiscal. “Flat net realisations and steady production, coupled with lower ‘other expenses’ imply flat year-on-year PAT. However, accounting for higher Gujarat royalty for the quarter could see earnings come materially below estimates,” said IDFC.
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The explorer last year deposited into separate a corpus some Rs 4,000 crore for leave encashment and post-retirement benefits of its employees. ONGC has 33,000 employees.
ONGC’s plan is to achieve a capital spend of Rs 1.64 lakh crore during the 12th Five-Year Plan period (2012-17). However, unless the subsidy burden on it comes down (thanks to oil price decontrol and a reduced share of its burden vis-a-vis the budget subsidy), it will have to borrow heavily to