ONGC net falls for first time in 10 years

Q4 profit dips 2% on higher subsidy payout, wage bill.

Oil and Natural Gas Corporation (ONGC), the country's largest oil
exploration and production company, incurred its first quarterly net
profit drop in ten years on a higher subsidy payout and a rise in
salaries.

The net profit fell 2 per cent to Rs 2,627 crore during the fourth
quarter as compared. Net sales rose by 26 per cent to Rs 15,626 crore
from Rs 12,397 crore in the earlier quarter.

The state-run company has now lost its standing as the highest profit-
making company to Reliance Industries.

Analysts expected ONGC's profit for the three months ended March 31,
2008 to rise 67 per cent. Shares in the company rose 1.02 per cent to
end the day's trading at Rs 864 on the Bombay Stock Exchange. The
stock declined by 4.22 per cent on the bourse last month.

The company gave discounts worth Rs 8,400 crore to oil marketing
companies to partly compensate them for selling petroleum products at
subsidised prices. The company also set aside Rs 1,050 crore during
the quarter as a provision for higher salaries and another Rs 885
crore as gratuity payment.

"The higher subsidy payout was the major reason why net profit fell
during the quarter despite a 66 per cent-plus rise in crude oil prices
during the quarter as against the quarter last year," said Chairman
and Managing Director RS Sharma.

ONGC should have got a price of $100.37 for every barrel of crude oil
it sold. However, it sold oil at $49.66 per barrel to government-owned
refiners after giving a discount of $50.71 a barrel.

"Our gains from higher crude oil prices were limited as we sold our
oil at half the price," said Finance Director D K Sarraf.

Sarraf said that even as the higher projected subsidy burden would
continue to be a worry, the company would not have to provide for
higher wages in the current financial year.

The petroleum ministry had earlier said that ONGC would give discounts
of around Rs 38,000 crore in 2008-09 to the oil refiners. "We have
suggested that the subsidy sharing should be discontinued," Sharma
added.

The company's depreciation cost also rose by 34 per cent to Rs
3,844.48 crore during the quarter from 2,863.73 crore. The company's
net profit for the full year ended March 31, 2008 (FY08) rose by 7 per
cent to Rs 16,702 crore from Rs 15,643 crore.