State-run Oil & Natural Gas Corp (ONGC) on Thursday reported the biggest drop in quarterly profit in almost four years.

ONGC revealed that its net profit slipped 31.8 per cent to Rs 5,897 crore, or Rs 6.89 per share, in the three months through September 30, from Rs 8,642 crore in the corresponding period of previous year.

The oil & gas giant held a drastic hike in its fuel subsidy outgo responsible for the drop in quarterly profit. The company's subsidy outgo jumped from Rs 5,713 crore in the second quarter of last fiscal year to Rs 12,330 crore in the same quarter of this fiscal.

Sudhir Vasudeva, chairman & managing director of ONGC, said, "The single reason for this was jump in our subsidy outgo - from Rs 5,713 crore in Q2 of last fiscal to Rs 12,330 crore this year."

In the quarter under review, the company's gross realisation stood at $109.85 per barrel of crude oil but as the company had to give a discount of $63.05 on every barrel, net realisation slipped to $46.8 per barrel.

The company expressed worry over increasing cost of production and declining net realisation. It said gross realisation of less than $60 a barrel wasn't sustainable.

The company also said that its crude oil output would likely jump from this year target of 27.002 million tones to 29.1 million tonnes in next fiscal. Gas production would likely increase from 25.73 million tonnes to 26.45 million tones.