PAT to increase by Rs 8500cr post gas price hike: ONGC

Oil major ONGC's profit after tax (PAT) is likely to increase by Rs 8500 crore post the recent gas price hike, director-finance Aloke Kumar Banerjee told CNBC-TV18 in an interview.

The government approved hiking gas prices to USD 8.4 per mmbtu (metric million British thermal units) on Thrusday. The hike that will come in effect from April 1, 2014 is based on recommendations given by the Rangarajan committee and will apply uniformly to all producers. Below is the edited transcript of Banerjee’s interview to CNBC-TV18. Q: Could you walk us through what you have collated now as the impact for you particularly at the profit level because of this gas price increase and also what your understanding is of how this quarterly gas price revision will be worked out, any communication on that to companies such as yours? A: Suppose the other things remain the same, the impact would be par dollar increase in gas price for ONGC’s bottomline whereas profit after tax (PAT) is expected to increase by Rs 8500 crore. This is when the other things remaining same. Nothing has been communicated to us on quarterly review as yet. Q: The problem is that all other things are never equal, even in the previous gas price hike you were not allowed to enjoy all those profits because of the higher subsidy burden, do you fear that a lot of these gains might be offset by higher subsidy pay out?
A: I cannot comment on that right now but at the same time whatever subsidy has been given now, this is the fixed amount of USD 56 per barrel. Infact for ONGC, it works out to be more because of the applicability of the subsidy to condensate is coming almost about USD 63 per barrel for ONGC.
Since it is a fixed amount, whenever the market price of the crude oil reduces, then one gets badly hit because the retail earning comes down. For example, last year we retained the price per barrel to about less than USD 48/barrel. This quarter, Q1 of this fiscal is expected to be less than USD 110-111/barrel, it will be in a range of USD 104/barrel.
In the first two months, it will be in the range of 105 per barrel and then it will be in a range of less than USD 105 per barrel. This subsidy remaining fixed, effectively 63 per barrel our retail earning is getting a hit. So, I do not know. It is immediately very difficult for us to know what would be the exact impact on profitability or bottomline. Hence, with other things remaining same, the  impact would be of the order of Rs 8500 crore exclusively for the gas price increase by a dollar.