IndianOil Ql net plummets 71% on subsidies burden
New Delhi   31-Jul-2008
Battered by the government's policy of keeping fuel prices artificially low in spite of runaway crude costs, flagship refiner-retailer IndianOil on Wednesday saw its first quarter profit plummet 71 % from the previous corresponding period. Despite an all-time high rate of earning from refining operations, profit in the April-June 2008 period sank to Rs 415.13 crore from Rs 1,468.41 crore in the year-ago period. The company, till recently the only Indian entity in the Fortune 500 list, scraped past the red mark essentially on an additional income of Rs 14,276 crore, including Rs 13,527 crore worth of bonds the Centre issued to the firm to partly compensate for the losses on fuel sales. In a paradoxical situation, pressure on the bottom-line also increased as sales rose which, in turn, increased the under-recoveries. Sales in the period under review stood at Rs 74,496.12 crore against Rs 52,861.96 crore in previous corresponding period. Chairman Sarthak Behuria said the company earned $16.81 on every barrel of crude it refined against $10.70 a barrel last year. But that earning was still inadequate in the face of huge losses being suffered on sale of motor and kitchen fuels at government-capped prices. The company is losing Rs 16.70 on each litre of petrol, Rs 27.61 on diesel, Rs 38.09 on kerosene and Rs 338.53 on each cooking gas refill. The company's daily losses now stand at Rs 413 crore. It was losing Rs 34 crore per day on sale of petrol, Rs 270 crore on diesel, Rs 76 crore on kerosene and Rs 33 crore on cooking gas. Under the situation, the company confirmed a TOI report published on May 17 it was not giving out new cooking gas connections as it lacked resources to procure additional cylinders and regulators quickly enough. Behuria said existing customers need not worry and the company was still enrolling applications for new connections. "But these (installation of new connections) are taking time as we do not have the money to procure the equipment... we have a waitlist of about 200,000 applicants. We are also checking multiple connections, diversion of cylinders and introducing technology such as smart cards etc to control losses from unlawful usage." He said there was no shortage of products and the company would not require importing fuels unless there was any refinery shutdown in the next 2-3 months. "We have enough inventory and are releasing 25% more supplies from depots... (Sporadic) complaints of non-availability is because sudden spurt in demand growth due to heavy usage in generators and malls due to power shortage," he said.