ONGC posts Rs 248-crore loss in Q4 on tax provisions; profit down 3.7%

India's top oil and gas producer ONGC posted a surprise loss in the March quarter after it made over Rs 12,100 crore provision for a contested tax liability.

Oil and Natural Gas Corporation (ONGC) reported a net loss of Rs 247.70 crore in the January-March quarter as compared to a net profit of Rs 8,859.54 crore a year back, according to a company statement.

Service tax department at various work centres had raised a demand for payment of service tax on the royalty the company paid to the state and central government on crude oil and natural gas it produces from below ground. The company challenged the demands in courts.

While the matter is pending in courts, "as an abundant caution, the company has deposited the disputed service tax and GST on royalty along with interest under-protest amounting to Rs 11,558 crore up to March 31, 2023," the notes to the accounts said, adding Rs 1,862 crore towards penalty and other differences in the tax demands has also been disclosed as contingent liability.

ONGC said it will continue to contest the tax before various forums based on the legal opinion, as per which the service tax/GST on royalty in respect of crude oil and natural gas is not applicable.

"The company has reviewed the entire issue of disputed service tax and GST on royalty and has decided to make a provision towards these disputed taxes as a prudent and conservative practice. Accordingly, during the quarter and year ended March 31, 2023, the company has provided Rs 12,107 crore towards disputed taxes of ST/GST on royalty for the period from April 1, 2016 to March 31, 2023 together with interest thereon," it said in the statement.

This, it said, "adversely impacted the profitability" for the fourth quarter of 2022-23 fiscal year and the full financial year FY23.

Revenue was up 5.2 per cent at Rs 36,293 crore in January-March.

For the full fiscal year 2022-23 (April 2022 to March 2023), ONGC posted a net profit of Rs 38,829 crore, down 3.7 per cent from Rs 40,306 crore net earning in the previous financial year.

The firm got USD 77.12 for every barrel of crude oil it produced in the January-March quarter and USD 91.90 per barrel in FY23. This compared with USD 94.98 per barrel realisation in January-March 2022 and USD 76.62 a barrel in 2021-22.

Gas price was up at USD 8.57 per million British thermal unit in Q4 and USD 7.34 in FY23. This compared with USD 2.90 per mmBtu in Q4 of the previous fiscal and USD 2.35 in FY22.

The company paid a total dividend of 225 per cent (Rs 11.25 per share of face value of Rs 5 each) with a total payout of Rs 14,153 crore.

ONGC said it produced 1 per cent less 21.5 million tonnes of crude oil FY23 while gas output was down 1.5 per cent at 21.3 billion cubic meters.

"The decrease in oil and gas production is mainly due to delay in implementation of KG-98/2, cluster-II project and less than envisaged production from WO-16 and Cluster-7 and reservoir issues in S1-VA fields," the statement said.

The firm's overseas unit too produced less crude oil at 6.35 million tonnes in FY23 as compared to 8.1 million tonnes in the previous year. However, net profit rose to Rs 1,700 crore due to higher crude oil prices when compared with Rs 1,589 crore net profit in FY22.

ONGC said it made a total of 8 discoveries (5 in onland and 3 in offshore) during FY 2022-23 in its operated acreages. "Out of these, 3 (2 in onland and 1 in offshore) are prospects and 5 (3 in onland and 2 in offshore) are pools (of older fields)," the statement said.