Reuters reported that India's Oil and Natural Gas Corporation reported a 44% rise in quarterly profit but fell short of expectations, hurt by government imposed discounts on its crude sales to state run refiners.

India regulates prices of liquefied petroleum gas, kerosene and diesel to keep them in check for the masses, with producers such as ONGC sharing the cost of subsidising state refineries by selling to them at a discount.

However, a higher burden from these subsidised sales has squeezed ONGC's margins as it continues an investment programme to boost its overseas interests and maintain output at its ageing domestic fields.

The company's net oil sales billing plunged to an 8 year low of USD 40.97 a barrel in its 2013/14 financial year, from USD 47.85 a barrel the previous year.

The cost to ONGC of helping to subsidise domestic fuel prices rose 14% to INR 563.84 billion in the year to March 31st.

Finance director Mr Aloke Banerjee said reporters that the impact of the higher subsidy costs had been restricted by a drop in spending on the drilling of dry wells and by the rupee's decline against the US dollar.

A fall in the value of the rupee helps ONGC because it bills oil sales in dollars.

The state run company reported a net profit of INR 48.89 billion in quarter to March 31st, up from INR 33.89 billion a year earlier. Net sales fell 2% to INR 208.81 billion.

Analysts, on average, expected a net profit of INR 57.27 billion.

Shares in ONGC, India's third biggest company by market value, were down 3% at the maket close, ahead of the results announcement. The share price has 36% in the past 3 months on increasing expectation of a rise in gas prices.