Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) reported bumper profits in the March quarter (when international prices soared to a near 14-year high of $139 per barrel) and record earnings in 2021-22, triggering talks of the government slapping a windfall tax.
“We have not received any communication on this,” ONGC chairman and managing director Alka Mittal told a news conference here.
Last week, Oil India Ltd (OIL) chairman SC Mishra stated the same.
“The government has been conveying to us to go aggressively on (oil and gas) exploration and production spending so as to augment domestic output and cut import reliance,” Mittal said.
While the government earns 65-66 paise in taxes on every rupee that ONGC earns, the remaining is ploughed back into finding more oil and gas. The absence of investment in exploration due to low oil prices in the past few years has been one big reason for global oil and gas production not keeping pace with demand globally.
The explorer had, however, not cut exploration and production spending even when oil prices were low, helping find and bring newer finds on to production to offset the natural decline that has set in old and mature fields.
“I don’t think they (government) will be talking about this (windfall tax),” Mittal said.
In recent days, the UK levied a 25 per cent tax on “extraordinary” profits from North Sea oil and gas production to raise $6.3 billion to help fund its support package.
The Indian government cut excise duty on petrol and diesel to ease inflationary pressure. This move cost the government Rs 1 lakh crore and talk of a windfall tax is to cover this deficit.
Mittal said ONGC is spending Rs 30,000-32,000 crore annually to maintain output from ageing fields and find new reserves.
Without this spending, the output will fall and India’s 85 per cent import reliance will increase.
She said ONGC will spend Rs 31,000 crore over the next 3 years just on exploration. It is implementing 6 projects at a cost of Rs 5,740 crore.
ONGC reported a record net profit of Rs 40,306 crore on a revenue of Rs 1,10,345 crore in the 2021-22 fiscal.
OIL posted Rs 3,887.31 crore net profit in the fiscal.