ONGC Q2 net profit falls 30% to Rs 12,826 crore


New Delhi: After the government introduced a new tax on windfall gains arising from rising international energy prices, India’s largest oil and gas company, ONGC, announced a 30% drop in profit net of the September quarter.

According to an Oil and Natural Gas Corporation (ONGC) statement, net profit for the July-September 2022-23 period was 12,825.99 crore rupees, or 10.20 rupees per share, compared with 18,347, 73 million rupees, or 14.58 rupees per share, for the same period last year.

Profit declined 15.6% compared to the previous June quarter, when it reported a net profit of Rs. 15,205.85 million.

While the company’s gross billings for the crude oil it produced rose 37.7% to USD 95.49 per barrel in July-September from USD 69.36 per barrel a year earlier, the net profit decreased.

State-owned ONGC sells crude oil at benchmark global prices that have risen since Russia’s invasion of Ukraine. Crude oil is refined in refineries to create gasoline, diesel, and other petroleum products.

However, the government introduced a new tax on July 1 to wipe out the gains from rising global energy prices. When the tax was first enacted, the price of a barrel of oil was as high as USD 40. The tax is updated every 15 days to reflect fluctuations in the price of crude oil worldwide.

ONGC Director (Finance) Pomila Jaspal said during an investor call that the company paid Rs 6.4 billion in Additional Excise Duty (SAED) during the quarter. Without this tax, ONGC’s profits would have surpassed record earnings in July-September 2021.

After choosing to pay less income tax instead of giving up exemptions, ONGC reported the highest quarterly net profit of any Indian corporation between July and September 2021.

As a result, instead of the previous rate of 30% plus applicable surcharge and cess, you now have a corporate tax rate of 22% plus applicable surcharge and cess. According to Jaspal, the system for collecting the windfall tax guaranteed that the corporation would get between $75 and $76 per barrel.

Every barrel of oil produced is subject to a production tax known as windfall tax, which is paid to the government. Other pre-existing fees, such as royalties and oil cessation, are paid after SAED is paid for newly produced crude oil.

For the natural gas it generated between July and September, ONGC reported receiving a British thermal unit price of $6.10, up from $1.79 a year earlier.

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