ONGC Q2 profit tumbles 30% on windfall tax woes

New Delhi: India's top oil and gas producer ONGC reported a 30 per cent fall in September quarter net profit after the government brought a new tax on windfall profits arising from a spurt in international energy prices. Net profit of Rs 12,825.99 crore, or Rs 10.20 a share, in July-September 2022-23 is compared with Rs 18,347.73 crore, or Rs 14.58 per share net profit in the same period a year ago, Oil and Natural Gas Corporation (ONGC) said in a statement.

Profit fell 15.6 per cent over the preceding June quarter when it had reported Rs 15,205.85 crore net profit. Net profit fell despite the company's gross billing for crude oil it produced soaring 37.7 per cent to $95.49 per barrel in July-September from $69.36 a barrel a year back.

State-owned ONGC sells crude oil, which is refined at refineries to produce petrol, diesel and other petroleum products, at international benchmark rates which soared following the Russian invasion of Ukraine. However, the government beginning July 1 brought a new tax to take away gains accruing from the global energy price surge. The tax, which is adjusted every 15 days in step with changes in global oil prices, was as high as $40 per barrel when the tax was introduced. At an investor call, ONGC Director (Finance) Pomila Jaspal said the firm paid Rs 6,400 crore as special additional excise duty (SAED) in the quarter. But for this levy, ONGC profits would have topped record earnings of July-September 2021.

ONGC had in July-September 2021 posted the highest ever quarterly net profit by any Indian corporate after it opted for lower income tax in lieu of giving up exemptions. As a result, its corporate income tax rate came to 22 per cent plus applicable surcharge and cess as against the earlier rate of 30 per cent plus applicable surcharge and cess. Jaspal said the mechanism to levy windfall profit tax ensures that the company gets $75-76 per barrel realisation. Any rate above that is taken away as tax.