India's ONGC Reports Steep Fall in Income

India's ONGC Reports Steep Fall in IncomeIndia's ONGC Reports Steep Fall in Income

Oil & Natural Gas Corp. reported the steepest decline in quarterly profit in at least nine years after India’s state explorer gave discounts on its crude to cover government fuel subsidy and international prices tumbled.

Net income for the country’s biggest energy explorer halved to 35.7 billion rupees ($575 million) in the third quarter ended Dec. 31, compared with 71.3 billion rupees a year earlier.

That missed the 58.96 billion rupee profit median of 31 analyst estimates compiled by Bloomberg. Sales fell 9.8 percent to 187.1 billion rupees, the New Delhi-based company said in a stock exchange filing Saturday.

The lower profit and declining oil prices are raising concerns about ONGC’s 11 trillion rupees spending plan, aimed at adding assets in India and overseas.

State-run explorers in India, including ONGC, are increasingly bearing a larger part of the government’s subsidy burden on cooking gas and kerosene as Finance Minister Arun Jaitley reduces the government’s portion to help narrow the budget deficit. The value of Brent crude halved in London trading last year, decreasing revenue for oil producers. Prices fell below $47 a barrel on Jan. 13, squeezing margins for ONGC, whose cost of production is about $40 a barrel.

The Indian company gave 94.6 billion rupees as discount on its crude in the quarter ended Dec. 31, eroding its profit by 53.9 billion rupees. The discount is given to state refiners, including Indian Oil Corp., which sell some fuels below cost to make them affordable for the poor.