Oil companies post huge losses in first quarter
New Delhi   26-Jul-2010

PUBLIC sector oil marketing companies have reported huge losses due to higher under-recoveries on petrol, diesel, LPG and kerosene during the quarter ended June 2010. Indian Oil Corporation (IOC) on Saturday reported a net loss of Rs 3,388.39 crore in Q1ended June on account of selling fuel below cost.

Hindustan Petroleum reported a net loss of Rs 1,884.29 crore for the quarter ended June 2010 as against a profit of Rs 649 crore for the corresponding period of 2009-10.

IOC, the nation's largest oil firm, had posted a net profit of Rs 3,682.83 crore in the April-June quarter of the last fiscal, the company said in a statement. The company accrued the losses as it was forced to sell petrol, diesel, domestic cooking gas LPG and kerosene below their actual cost and was not compensated by the government for it. IOC lost Rs 11,013.85 crore in revenues in AprilJune quarter. Of this, it got Rs 3,671.26 crore from upstream firms, Oil and Natural Gas Corp (ONGC), GAIL India and Oil India.

"Consequent to non-revision of retail selling price in line with international prices, the company has suffered net under-realisation of Rs 7,342.59 crore on sale of petrol, diesel, PDS kerosene and domestic LPG," it said. Net sales rose 23 per cent to Rs 71,275.07 crore in AprilJune of 2010-11. The refining margins during April-June were low mainly due to inventory losses as oil prices had come down compared to IOC's closing stock on April 1.

Total income of HPCL increased to Rs 29,219.87 crore in the April-June quarter this year as against Rs 24,197.58 crore during the same period in 2009-10.

The government, which in the previous year had issued bonds or paid cash for upto half of the revenue lost on selling fuel below cost, has so far not announced how it will make up for over Rs 20,000 crore under-recoveries of IOC, Bharat Petroleum and Hindustan Petroleum in the first quarter of 2010-11 fiscal. Upstream firms give discount on crude oil and LPG they sell to the retailers to make up for one-third of the revenues IOC, BPCL and HPCL lose on selling fuel below cost.

IOC said it made only USD 3 on processing of every barrel of crude oil in the April-June quarter as compared to USD 7.36 per barrel gross refining margin (GRM) in the corresponding period of the previous fiscal. There were also negatives on account of exchange losses due to rupee depreciation and higher provisioning required for bonds.

"The loss during the quarter is primarily on account of absorption of under-recoveries on the sale of sensitive petroleum products amounting to Rs 2,939 crores during the quarter," HPCL finance director B Mukherjee said.