ONGC Q2 profit drops 30% to ₹12,826 cr on windfall tax woes

India’s top oil and gas producer ONGC reported a 30% fall in September quarter net profit after the government brought a new tax on windfall profits arising from a spurt in international energy prices.

Net profit of ₹12,825.99 crore, or ₹10.20 a share, in July-September 2022-23 is compared with ₹18,347.73 crore, or ₹14.58 per share net profit during the same period from 2021-22, Oil and Natural Gas Corporation (ONGC) said in a statement.

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Profit fell 15.6% over the preceding June quarter when it had reported ₹15,205.85 crore net profit. Net profit fell despite the company’s gross billing for crude oil it produced soaring 37.7% to $95.49 per barrel in July-September from $69.36 a barrel in 2021.

State-owned ONGC sells crude oil which is refined at refineries to produce petrol, diesel and other petroleum products, at international benchmark rates which soared following the Russian invasion of Ukraine.

However, the government beginning July 1, brought a new tax to take away gains accruing from the global energy price surge. The tax, which is adjusted every 15 days in step with changes in global oil prices, was as high as $40 per barrel when the tax was introduced.

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At an investor call, ONGC Director (Finance) Pomila Jaspal said the firm paid ₹6,400 crore as special additional excise duty (SAED) in the quarter. But for this levy, ONGC profits would have topped record earnings of July-September 2021.

ONGC had in July-September 2021 posted the highest ever quarterly net profit by any Indian corporate after it opted for lower income tax in lieu of giving up exemptions. As a result, its corporate income tax rate came to 22% plus applicable surcharge and cess as against the earlier rate of 30% plus applicable surcharge and cess.

Jaspal said the mechanism to levy windfall profit tax ensures that the company gets $75-76 per barrel realisation. Any rate above that is taken away as tax.

Windfall profit tax is a production levy and is paid to the government on every barrel of oil produced. SAED is the duty first on crude oil produced and other pre-existing levies such as royalty and oil cess are paid thereafter.

ONGC said it got a higher $6.10 per million British thermal unit price for natural gas it produced in July-September as compared to $1.79 in 2021.

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Revenue from operation was up 57.4% to ₹38,321 crore. The ONGC board approved an interim dividend of 135%, or ₹6.75 on each equity share of ₹5. The total payout will be ₹8,492 crore, the majority of it going to the government.

The government owns almost 59% shares of ONGC. ONGC’s oil and gas production dropped 2% in the second quarter of the current fiscal year.

Oil production of 5.36 million tonnes in July-September is compared with 5.47 million tonnes output in 2021-22. Similarly, gas production of 5.35 billion cubic meters in Q2 is compared with 5.46 bcm output in July-September 2021.

The firm said it made six discoveries during the current fiscal year in the KG basin acreage it holds. “Out of six discoveries notified till date during FY 2022-23, two discoveries viz. Mandapeta-60 and Kesanapalli West Deep-7 have already been monetized by ONGC,” the statement said.

(With inputs from agencies)