India’s top oil and gas producer ONGC posted a surprise loss in the March quarter after it made an over Rs 12,100 crore provision for a contested tax liability.
The Oil and Natural Gas Corporation (ONGC) reported a net loss of Rs 247.70 crore in the January-March quarter compared with a net profit of Rs 8,859.54 crore a year back, according to a company statement.
Service tax departments at various work centres had raised a demand for payment of service tax on the royalty the company paid to the state and central government on crude oil and natural gas it produces from below ground. The company challenged the demands in court.
While the matter is pending in courts, “as an abundant caution, the company has deposited the disputed service tax and GST on royalty along with interest under-protest amounting to Rs 11,558 crore up to March 31, 2023,” the notes to the accounts said, adding Rs 1,862 crore towards penalty and other differences in the tax demands has also been disclosed as a contingent liability.
ONGC said it will continue to contest the tax before various forums based on the legal opinion, according to which the service tax/GST on royalty in respect of crude oil and natural gas is not applicable.
“The company has reviewed the entire issue of disputed service tax and GST on royalty and has decided to make a provision towards these disputed taxes as a prudent and conservative practice. Accordingly, during the quarter and year ended March 31, 2023, the company has provided Rs 12,107 crore towards disputed taxes of ST/GST on royalty for the period from April 1, 2016, to March 31, 2023, together with interest thereon,” it said in the statement.
This, it said, “adversely impacted the profitability” for the fourth quarter of the 2022-23 fiscal year and the full financial year FY23.
Revenue was up 5.2 per cent at Rs 36,293 crore in January-March.
For the full fiscal year 2022-23 (April 2022 to March 2023), ONGC posted a net profit of Rs 38,829 crore, down 3.7 per cent from Rs 40,306 crore net earnings in the previous financial year.
The firm got $77.12 for every barrel of crude oil it produced in the January-March quarter and $91.90 per barrel in FY23.
This compared with $94.98 per barrel realisation in January-March 2022 and $76.62 a barrel in 2021-22.
Gas price was up at $8.57 per million British thermal units in Q4 and $7.34 in FY23. This is compared with $2.90 per mmBtu in Q4 of the previous fiscal and $2.35 in FY22.