Profits were also bolstered by one-off benefits on account of lower write-offs and foreign exchange gains on a sharply weaker rupee during the quarter.

ONGC, India’s second-largest listed firm, reported net profit of 86.42 billion rupees ($1.76 billion) for its fiscal second quarter ended September, compared with 53.89 billion rupees a year earlier.

A Reuters poll of 11 brokerages had on average expected net profit of 65.1 billion rupees for the quarter.

“The realizations are much better, mainly because crude prices were high, but also because the fuel price hike in June eased the subsidy burden,” said Deven Choksey, managing director at Mumbai’s KR Choksey Shares & Securities.

ONGC said net realizations from oil sales jumped to $83.70 per barrel from $62.75 a barrel a year earlier. Discounts to state-run refiners reduced profit by 33.2 billion rupees, the company said.

This was, however, half the 68.8 billion rupees decrease in profit it suffered in the April-June quarter.

“Discounts (to retailers) are down significantly from the previous quarter, but what we need to watch out for is how the subsidy sharing mechanism is maintained,” said Deepak Pareek, sector analyst at brokerage Prabhudas Lilladher.

India allows state-run refiners to set retail prices for petrol, but the government controls the prices for diesel, cooking gas and kerosene, which means local exploration firms like ONGC must share the shortfall by selling crude to those refiners at discounted rates.

Indian state-run oil companies are expected to rack up revenue losses of $26.4 billion in the fiscal year ending March 2012, India’s Oil Minister S Jaipal Reddy said earlier this week.

New Delhi aims to loosen control of fuel prices, but has found this difficult with global crude prices staying well above $100 a barrel most of this year.

India’s state-run fuel retailers raised petrol prices by about 2.7 percent from Friday, their fourth increase in prices this year, but have found it difficult to raise diesel prices.

India last raised diesel prices by 9 percent in June.

ONGC’s second-quarter net sales rose to 226.2 billion rupees from 181.9 billion a year ago.

The company gained from higher crude oil prices compared to a year earlier, earning additional revenue of 43.92 billion rupees in the quarter, Chairman Sudhir Vasudeva said.

“It(the rise in profit) is on the subsidy burden. Another thing is the variation in price. Oil prices this quarter have been very high compared to same period last year,” he said.

Other income rose by a quarter to 11.3 billion rupees, while depreciation and write-offs declined by 26 percent during the July-September period, the company said.

ONGC, which has been investing heavily to maintain output from its old fields, has said it aims to raise its crude oil production by 15 percent to 28 million tons, or 560,000 barrels per day (bpd), by March 2014.

ONGC is keen on bidding for assets in Myanmar, Vasudeva said. Earlier this year, Mynamar had sought bids from foreign firms to develop 18 new onshore oil and gas blocks, but said the winners will be required to set up joint ventures with local companies.

India is the world’s fourth-largest oil importer, importing about 80 percent of its crude needs. It is scouting for oil and gas assets abroad to meet demand in a fast-growing economy, and to feed its expanding refining capacity.

Shares in ONGC, the second-largest listed firm in India by market value, closed down 0.4 percent in a Mumbai market that rose 0.5 percent.

The stock, valued at $48.4 billion, has declined nearly 14 percent so far in 2011, matching a similar fall in the main stock index.