'IndianOil must pump in Rs 40k cr a year to grow'
New Delhi   13-Nov-2009
IndianOil the country’s biggest company by sales, will have to invest Rs 40,000 crore annually to maintain growth. For that, it needs to generate annual profit of Rs 10,000 crore, says a senior official of the public sector oil marketing company (OMC) which has heavy under-recoveries on retail sale of key petroleum products in the domestic market due to the regulated pricing regime. Mr. S. V. Narasimhan, IndianOil Director (Finance) told FE, IndianOil needs to make investment of Rs 40,000 crore every year. That means it must generate profit of at least Rs 10,000 crore every year. The current retail prices of petrol and diesel would be justified if international prices were at the level of $58 a barrel. However, crude prices are currently ruling at a much higher level in the international market. And since domestic retail prices of the transportation fuels have not been revised in line with the price in international crude market, the company is not able to recover its cost, Narasimhan said. Similarly, the company is also bearing under-recoveries on sale of domestic LPG and PDS kerosene. It incurred under-recovery of Rs 7,135 crore on sale of these two products during the first half of the current financial year. While IndianOil is able to meet under-recoveries on sale of petrol and diesel with subsidy discounts provided by upstream companies such as ONGC and Oil India Ltd (OIL) under the subsidy-sharing regime, it s under-realisation from the sale of domestic LPG and PDS kerosene remain uncovered. During 2003-2008, the earlier period of high oil price, IndianOil achieved high gross refining margin (GRM) because of significant inventory gains from rising international oil prices. However, it does not see any such upside in the current financial year, with the international oil markets showing signs of price stability after rising from the low level of December 2008. So its capacity to bear under-recoveries on sale of LPG cylinders and PDS kerosene could be very limited, the IndianOil’s Director (Finance) said.