GSPC's latest annual report shows that the company recorded loss of a whopping Rs 16,303.19 crore for the year 2016-17
Even as the Rs 11,000 crore scam of diamantaire Nirav Modi seems to be dominating the news, Gujarat government owned Gujarat State Petroleum Corporation (GSPC) has quietly written off almost Rs 15,000 crore. This is part of the money GSPC had spent for gas exploration in its Krishna-Godavari (KG) Block in Bay of Bengal since 2005, before selling the project to ONGC last year.
GSPC's latest annual report shows that the company recorded loss of a whopping Rs 16,303.19 crore for the year 2016-17, mainly due to writing off the money spent in KG Block, and helped by sharp rise in finance cost, and provisions for doubtful debts.
"The company has recorded loss on account of impairment of Rs 14,923.54 crore, which is charged to profit & loss," GSPC said in the report.
The staggering loss marks a sharp reversal in the fortunes of GSPC, which was once considered a blue chip and a shining jewel in the crown of the Gujarat government. In 2005, Narendra Modi, who was then the state's chief minister, had announced that GSPC had struck gas worth Rs 2 lakh crore in KG Block.
While GSPC continued to pour money, and almost blindly, in the project, it had little to show when it finally decided to sell 80% stake to ONGC last year.
"The KG Block has substantial gas and condensate reserves, but due to technical challenges such as high pressure high temperature, and tight reservoirs in offshore environment, the requisite future capital investment to achieve desired levels of production had pushed the company towards a highly leveraged position. The company was unable to infuse further capital for future development which triggered the strategic transfer of KG Asset to ONGC," GSPC noted in the report.
GSPC's joint managing director T Natarajan could not be reached for comment.
A senior GSPC official told DNA that the company had spent more than Rs 23,000 crore for exploration and development work in KG Block, as against which it received $1.19 bn or Rs 7,738 crore from ONGC for its 80% participating interest and operatorship rights in the Deen Dayal West (DDW) field., and towards acquisition rights of other discoveries in the Block.
Rs 15,000 crore, the difference between what GSPC spent in KG Block, and what it got from ONGC, was booked as impairment in its accounts.
For 2016-17, GSPC incurred finance cost of Rs 1,929 crore, which was 36 times more than Rs 52.25 crore in the year before that. It also made provision of Rs 289.93 crore for doubtful debts, while booking Rs 917.68 crore towards depreciation, amortization, depletion and impairment in 2016-17.
LOSS ERODES GSPC’S NET WORTH
- The transaction for sale of participating interest in KG Block has led to an impairment linked financial loss, exceeding the net worth of the company, the report said
- GSPC, however, continues to hold 10% participating interest in DDW field, having taken over the stake held by its earlier partner Geo Global Resources
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