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Aug 08, 2013, 09.24 AM IST | Source: CNBC-TV18

ONGC's Q1 subsidy burden around Rs 12300cr

For Q1, the subsidy burden has fallen by about 48 percent and that is why upstream companies are now paying Rs 15,000 crore, which is the same as last year and the rest is being paid by the government, which is around 40 percent; 60 percent is coming from upstream companies

Anuj Singhal

Editor-Markets Desk, CNBC-TV18

The first quarter subsidy burden of companies in the oil and gas space seems to be on expected lines with the government keeping the number of upstream companies intact. Sources indicate that ONGC 's Q1 subsidy burden has come in at around Rs 12,300 crore, while it is at Rs 2,000 crore for Oil India , and Rs 700 crore for GAIL , reports CNBC-TV18's Anuj Singhal.

Also Read: DGH fines RIL $1.78 bn for gas shortfall

Considering this is just the first quarter subsidy burden and normally the overall number is fixed at the end of the fourth quarter, even extrapolating, it may not be the best indicator for the full year.

Keeping that caveat in mind, the market had assumed that maybe absolute number will also come down a bit since subsidies have come down by about 40 percent year on year. But from the looks of it, upstream companies may not be getting any benefit of that and it will be the government which will take all the shares for cutting subsidies.

For Q1, the subsidy burden has fallen by about 48 percent and that is why upstream companies are now paying Rs 15,000 crore, which is the same as last year and the rest is being paid by the government, which is around 40 percent; 60 percent is coming from upstream.

Oil and Natural Gas Corporation (ONGC), Oil India and GAIL India’s Q1 subsidy burden remains absolutely intact. Of course, for GAIL, this maybe the last year of subsidy burden because next year there will be gas price hike.

What happens going forward is the key because as of now the government factors in Rs 1 lakh crore of under recoveries, though oil marketing companies say that under recoveries are already projected at Rs 1.28 lakh crore because of rupee depreciation, but the catch here is that they are talking about trade parity and there is also export parity pricing overhang, which remains.

So, the government at this point in time believes that Rs 1 lakh crore would be the subsidy burden, upstream companies may pay Rs 60,000 crore, government may pay Rs 40,000 crore. Last year, upstream companies paid Rs 60,000 crore, government paid Rs 1 lakh crore. So, contribution by upstream companies last year was 38 percent. This year optically of course it may look higher at 60 percent, but the overall number would still be the same.

ONGC’s stock has already fallen a lot. It will come out with numbers next week. Since the gas price hike the stock has already come down by about 25 percent or so. So, the jury is still out on how much more the stock has to fall but as of now it looks like the fear that the market had that the benefit of reforms will entirely go to the government and not too much to the upstream companies; looks like that is going to happen.

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