The state-run Oil & natural Gas Corporation (ONGC) has argued that rising subsidy burden is adversely affecting its profitability. The company faces a subsidy burden of Rs 7,448 crore in the first half of the current fiscal. The under recovery is borne by ONGC in the form of subsidy discount on crude oil, domestic LPG and SKO-PDS supplied by it.
According to ONGC sources, for the year 2006-07, the gross crude price (before subsidy discount) earned by ONGC was $66.33 per barrel, as against $59.66 per barrel in 2005-06, an increase of $6.67 per barrel. However, due to subsidy discount, the net price (after subsidy discount) was $44.22 per barrel for the year 2006-07 as against $42.34 per barrel during 2005-06, an increase of $1.88 per barrel.
?It can be seen that though there was surge in international price to the extent of $6.67/bbl, ONGC could get the benefit only to the extent of $1.88/bbl which is only around 28% of the increase in price,? sources said.
The amount of subsidy borne by ONGC in 2006-07 was Rs 17,025 crore and impact on profit after tax (PAT) was Rs 10,333 crore. Further, ONGC sources said that the cost of entire range of oil field equipment and services goes up in tandem with increase in crude price. While total increase in cost of equipment and services is borne by ONGC, only part of the increase in crude price is accrued to ONGC, which is adversely affecting the profitability of ONGC.