Indian Oil profit drops 35%
New Delhi   30-May-2014

IndianOil, the nation's largest oil firm, today reported a 35 per cent drop in fourth-quarter net profit as refining margins shrank and the government did not fully compensate it for losses on fuel sales.

Net profit declined to Rs 9,389.85 crore in the January-March quarter from Rs 14,512.81 crore in the corresponding period a year ago, IOC chairman Mr RS Butola told reporters here.

Explaining the reasons for drop in profit, IOC director (finance) Mr PK Goyal said in Q4 of 2012-13 the company had received subsidy for more than one quarter that boosted profits. The company, he said, lost Rs 20,395 crore in revenue on selling diesel and cooking gas in January-March. Against this, it got Rs 18,505 crore from the government and Rs 9,626 crore from upstream.

IOC will raise $750 million in external commercial borrowings this fiscal. Besides, it will raise another $900 million in overseas debt to repay bridge loan it had taken for acquiring shale gas asset in Canada, he said.

The firm, which owns eight refineries, earned $2.17 on every barrel of crude oil turned into fuel as against a gross refining margin (GRM) of $3.33 per barrel in Q4 of 2012-13.

The company had got a lump sum cash subsidy for more than one quarter in January-March of 2013.

Retailers such as IOC sell diesel and cooking fuels LPG and kerosene at government-controlled rates, which are below cost. The difference, called under-recoveries, is made good through a combination of cash subsidy and assistance from upstream oil and gas producers, including Oil & Natural Gas Corp. While the upstream firms make quarterly payments, the government subsidy is not that regular and is often clubbed for more than one quarter.

IOC said it got Rs 37,182.77 crore from the government as cash subsidy and Rs 34,673.59 crore from upstream firms, which were not sufficient to cover Rs 72,938.45 crore of losses on fuel sales. It absorbed losses of Rs 1,082.59 crore.

The company, which posted losses in two of the previous three quarters after not getting timely subsidy, reported an annual net profit of Rs 7,019.09 crore for 2013-14, up from Rs 5,005.17 crore in 2012-13.

It suffered a foreign exchange loss of Rs 3,190.92 crore in the previous financial year.

IOC's GRM was $4.24 per barrel in 2013-14, up from $3.16 in the previous year.