Oil and Natural Gas Corporation (ONGC) and GAIL India are likely to give 33 per cent lesser discounts on crude oil and cooking gas to the state-owned refining and marketing companies than estimated as oil prices have tumbled in the last three months and the refiners have started making profits.
The government had said in June this year that oil and gas producers such as ONGC, Gail and Oil India would give discounts worth Rs 45,000 crore to the crude oil refiners. The under-realisation of the refiners was then estimated to be Rs 2,45,000 crore in this financial year. The burden for the oil producers is now estimated to come down to Rs 30,000 crore with the annual under-realisation at Rs 1,14,000 crore.
“The oil ministry has told us that our total burden this year will not be more than Rs 30,000 crore,” said a top ONGC official.
With oil prices falling by over 70 per cent from their peak in June this year, the state-owned refiners Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation have started making profits on their petrol and diesel sales, despite the fuel price cut last week.
ONGC, Gail and Oil India have already given discounts worth around Rs 25,000 crore in the first six months of this financial year till September. This leaves around Rs 5,000 crore more worth of discounts for the rest of the year.
The oil producers have, however, asked the government not to give any discounts in the quarter ending December. “We wrote to the oil ministry last week. We are yet to hear from them,” said a senior official with Oil India, the second-largest government-owned oil producer.
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“If we give discounts this quarter, our margins will be severely affected,” said another senior ONGC official.
ONGC, the country’s largest oil producer, gave discounts worth Rs 12,600 crore during the quarter ended September. Oil India gave a Rs 1,356-crore rebate, while Gail gave Rs 400 crore discount on the cooking gas it sells to the refiners.
The higher subsidy drove down ONGC’s quarterly profits by 7 per cent compared with the same quarter a year ago.
Lower oil prices have brought down the price, at which ONGC and Oil India sell their oil, to an average price of less than $60 a barrel so far this quarter. ONGC’s total cost of producing the oil, along with payment of royalty and various other taxes, is around $33 per barrel.