NEW DELHI: In a move that may spook Oil and Natural Gas Corp's (ONGC) planned public offer, the government has increased the burden of fuel subsidy payable by upstream oil firms from one-third to 38.8 pr cent for 2010-11 fiscal. Of the Rs 78,159-crore revenue that retailers lost on selling diesel, LPG and kerosene at government-controlled rates in 2010-11, upstream companies ONGC, Oil India and GAIL have been ordered to contribute Rs 30,296.75 crore (38.8 per cent). Traditionally, upstream companies made up roughly one-third (33.33 per cent) of the revenues lost on fuel sales through discounts on crude oil and products they sold to Indian Oil, Hindustan Petroleum and Bharat Petroleum . "We have just being told that our subsidy contribution for 2010-11 fiscal will be 38.8 per cent instead of one-third subsidy we had been sharing for past four years," ONGC Chairman and Managing Director A K Hazarika told reporters. ONGC has been ordered to chip in with Rs 24,892.43 crore, OIL Rs 3,293.08 crore and GAIL Rs 2,111.24 crore. "We are giving Rs 3,832 crore more in subsidy that we had projected earlier," he said. ONGC's got USD 55.94 for crude oil it sold in 2009-10 and after the increased subsidy, its net realisation in 2010-11 would be USD 52-53 per barrel. "Our profits will be adversely impacted by Rs 2,000 crore due to this additional subsidy outgo," Hazarika said. ONGC, which had in the first three quarters of the 2010-11 fiscal provided Rs 12,757 crore in subsidy, has seen its stock price plummeting by 11 per cent this week on reports of government plans to increase its subsidy outgo. ONGC shares ended 1.17 per cent down at Rs 274.05 on the Bombay Stock Exchange today. The company has slipped to third place in M-cap behind Reliance Industries and Coal India and the falling stock price may impact the timing of government's sale of 5 per cent shares in a follow-on public offer (FPO). "The timing is for the Department of Disinvestment to decide. We were told that the FPO would happen in first week of July and accordingly we are prepared," he said refusing to say if the ad-hoc subsidy mechanism followed by the government may keep investors away. ONGC has been been critical of the ad-hoc subsidy mechanism and has demanded that the government should come out with a transparent policy in the larger public and shareholder interest. The government was targeting Rs 14,000 crore from the FPO but at current rates it will get just over Rs 11,000 crore and there are doubts being expressed if the July 5 timeline for opening of the public offering will be adhered to or not. Hazarika, however, said the company's profitability will be more than Rs 16,700 crore net profit earned in 2009-10 fiscal. "We made Rs 16,100 crore of net profit in first nine months and for the full fiscal we will do better than last year," he said.

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