Indian Oil Corp (IOC) has overtaken Oil and Natural Gas Corp (ONGC) to become India’s most profitable state-owned company. IOC, which has for decades been India’s biggest company by turnover, posted a 70% jump in net profit to Rs191.0640 billion in the financial year ended 31 March, 2017. This was more than the Rs. 179 billion net profit ONGC posted in the 2016-17 fiscal, making IOC the most profitable PSU, according to earning statements of the companies. Billionaire Mukesh Ambani-led Reliance Industries retained the crown of being India’s most profitable company for the third year in a row, posting a net Rs. 299.01 billion in financial year 2016-17.
Tata Consultancy Services, India’s largest software services exporter, with a net profit of Rs. 263.57 billion was the second most profitable company in the country. ONGC was long India’s most profitable company but lost the crown to private sector Reliance and TCS a couple of years back. It has now been unseated as the most profitable PSU by IOC. In the previous 2015-16 fiscal, IOC had a net profit of Rs. 112.4223 billion as compared to ONGC’s Rs. 161.40 billion.
While IOC Chairman B Ashok attributed the profit growth to higher refining margins, inventory gains and operational efficiencies, ONGC Chairman and Managing Director Dinesh K Sarraf said the company lost Rs. 30 billion in net profit due to government’s natural gas pricing policy that has made the business economically unviable. The BJP-led government had in October 2014 evolved a new pricing formula using rates prevalent in gas surplus nations like the US, Canada and Russia to determine rates in a net importing country. Prices have halved to $2.48 per million British thermal unit since the formula was implemented. Sarraf said the company lost Rs. 50.10 billion in revenue on natural gas business from 35% drop in gas prices in last one year. “Our profit would have been about Rs. 30 billion higher if we got remunerative gas price,” he said.
“Natural gas is no more profitable business because cost of production is very very significantly higher than current gas prices,” he said. Oil Minister Dharmendra Pradhan in a written reply to a question in Lok Sabha on March 20 had stated that the cost of production of natural gas in the prolific Krishna Godavari basin is between $4.99 per mmBtu and $7.30 per mmBtu. The same for other basins is in the range of $3.80 per mmBtu to $6.59 per mmBtu, he had said, adding the production costs of companies vary from field to field depending upon size of the reservoir, location, logistics and availability of surface facilities. ONGC is the country’s biggest gas producer, accounting for some 80% of the 70 million standard cubic meters per day current output.