Govt bailout helps IndianOil log Rs 5,294-cr profit in Q2
New Delhi   14-Nov-2010

The compensation received from the Government for revenue loss incurred on account of selling petroleum products below market price has helped IndianOil increase net profit sharply for the second quarter of this fiscal.

The company has reported a profit of Rs 5,294 crore for the second quarter against Rs 284 crore for the same quarter the previous year. Gross turnover rose 14.5 per cent to Rs 74,757 crore (Rs 65,262 crore).

On Friday, the company's shares ended down 1.14 per cent at Rs 403.45 on the BSE.

Mr B.M. Bansal, Chairman, IOC, told newspersons after the board meeting: "The profit for the current quarter was achieved mainly due to Government compensation of Rs 7,220 crore approved for both the quarters compared to nil during the corresponding quarter of the previous year and increased refining margins."

IOC incurs revenue loss on selling petroleum products below the market price. The Government has been following a burden sharing mechanism, to ensure that the burden of under- recoveries is shared by all stakeholders: the Government, the public sector oil companies and the consumers.

Government shoulders the burden through cash subsidy, domestic upstream oil companies through price discounts to public sector oil marketing companies, oil retailers bear a portion of the under recovery, and consumers bear minimal price increase. During the second quarter, the under-recoveries incurred by the company was Rs 6,407 crore.

High crude oil prices helped the company register a better gross refining margin during the quarter. GRM is the difference between total value of petroleum products and the price of crude. The GRM during the second quarter stood at $6.63 a barrel ($ 3.62/bbl).

IOC is looking at raising $500-million foreign loans in the current fiscal.