Duty cut won't affect balance sheet: ONGC

Oil and Natural Gas Corporation expects to square off part of its outgo on account of taxation changes announced yesterday with the Rs 500-crore gain it sees in lowering of corporate tax.

ONGC executives told Business Standard the company's price realisation from crude oil sales would be less by about Rs 500 crore.

ONGC sells crude to refineries at import parity price after offering some discount. With finance minister P Chidambaram deciding to cut down Customs duty on crude to 5 per cent from 10 per cent, ONGC would be earning less on crude sales.

ONGC stands to lose $1 per barrel with the reduction in customs duty. ONGC produces 14.3 million tonne of crude oil from offshore fields (one tonne equals 7.3 barrel).

It gives a discount to refiners which roughly amounts to 50 per cent of the difference between the landed cost, including duties, insurance etc, and the free-on-board price (which includes only freight cost) of crude.

The company would also earn about Rs 100 crore less on sale of LPG and kerosene to oil marketing companies since the customs duty on these items was removed.

"The impact of lower realisation of crude and LPG and kerosene on our revenue would be Rs 600 crore but its impact on profit after tax would be around Rs 390 crore," he said.