Refining margins push IOC net profit by 135%
New Delhi   11-Feb-2011

State-owned IndianOil (IOC) on Thursday reported a 135% jump in net profit in the December quarter of this financial year to Rs 1,635 crore, mainly due to higher refining margins and the absence of any mark to market losses from financial instruments.

IOC chairman S V Narasimhan told reporters that the company’s gross refining margin has gone up in the quarter to $6.33 a barrel from $3.6 a year earlier. Besides, there was no mark-to-market losses on financial instruments in the December quarter unlike the same time a year ago. However, profits were lower by 24% in the first nine months of the fiscal at Rs 3,540.2 crore. Turnover shot up 16.7% in the December quarter to Rs 82,179 crore, while it was 17.91% higher at Rs 2,34,901 crore in the first nine months of the fiscal. The company processed 13.3 million crude in the December quarter, a 6.8% rise from the same period a year ago. “For the full year, we estimate a gross under recovery (revenue loss from selling fuel below cost) of Rs 42,000 crore for IOC and about Rs 75,000 crore for the industry,” Narasimhan said. IOC is now losing Rs 190 crore per day on sale of diesel, domestic LPG and kerosene below their cost.

The company has invested Rs 8,340 in capacity expansion till December, which is expected to go up to Rs 13,000 crore by the end of the fiscal, Narasimhan said.

The rise in crude oil price and the government's inability to deregulate the retail price of diesel has forced IOC to defer its plan to hit the market with a follow on public offer. As per the original plan, the government was to sell 5% of its share, while IOC was to issue 5% fresh shares to raise funds from the market.

Narasimhan said that IOC made the groundwork for the FPO in the hope that crude oil price would stabilise at $75 a barrel and that the government would be able to deregulate the price of diesel. “But suddently, under-recoveries started rising. At this stage, due to high inflation, we cannot do further deregulation. There is no time frame for the FPO now,” the IOC chief chairman said. Although the Indian basket of crude oil is in the region of $98 a barrel and fuel retailers have not fully passed on the cost of petrol to consumers, IOC does not intend to increase petrol price in the near future. “We are keeping a watch on crude price. We hope that the price will come down. We are not taking any decision at this juncture,” he said. He added that every time the company increased petrol price, it kept a portion of the desired price increase in abeyance, hoping that crude price would soften and would make up for the losses.