IndianOil needs Doc pills to stay healthy
Kolkata   05-Jun-2008
IndianOil may register losses in the first quarter of 2008-09 if the Manmohan Singh government does not come up with a package comprising a mix of oil bonds, duty restructuring and a price hike. This is necessary since recently announced packages do not address long-term liquidity issues of the oil behemoth in terms of under recovery. Last month, the country's largest re-finer and fuel retailer posted a net loss of Rs 414 crore in the quarter ended March 2008 due to spiralling crude prices in the international market. At present, the cash-strapped oil marketing company is losing close to Rs 500 crore per day on sale of petrol, diesel, kerosene and LPG. <font color=#cc6600>"With two months of the current fiscal having passed without any significant announcement in terms of a price revision, oil bonds or a duty rationalization, IndianOil may even incur losses in the first quarter of the current fiscal if the central government does not announce a package that addresses long-term liquidity issues of the company, Mr SV Narasimhan, IndianOil's finance director told ET.</font> IndianOil's under-realization bill for the current year is slated to swell to Rs 2,55,000 crore, a three fold rise over last year, due to high crude oil prices. "Measures announced by Reserve Bank of India (RBI) ease liquidity in the short run but do not either address the issue of profitability or the long-term liquidity jinx. We also need to see that the company's net worth does not get eroded," headed. The IndianOil top brass expects a stimulus package announcement that will include a mix of oil bonds, duty restructuring and a price hike. "If the government announces a package, we will adjust our borrowing programme accordingly," he said. Oil analysts felt that at current crude prices, the need of the hour is a minimum hike of Rs 16 per litre in case of petrol, Rs 23 per litre in case of diesel, some Rs 28 per litre for kerosene and at least Rs 300 per cylinder in case of LPG to neutralize the under-realizations problem. "This calls for a package announcement that will have to include oil bonds, duty restructuring as well as price hike," they added. RBI has recently allowed IndianOil and other oil marketing companies to irade in oil bonds via special market operations, subject to a ceiling of Rs 1,000 crore per day and has also decided to provide forex to the oil marketing companies including IndianOil, BPCL, and HPCL to help them tide over the present financial crunch. The apex bank has also allowed IndianOil to borrow to the extent of 25% of its assets. This offers the company a room to raise additional funds to the extent of Rs 25-30,000 crore.