Government-owned IndianOil, the country’s largest oil marketing company, has reported a more than three-fold increase in fourth-quarter net profit even as its annual profit dipped 47 per cent to Rs 3,954.62 crore due to the impact of an entry tax in Uttar Pradesh, petrol losses and a higher interest burden.
Net profit for the quarter ended March stood at Rs 12,670.43 crore against Rs 3,905.2 crore in the same quarter last year. Net sales for the quarter rose 30 per cent to Rs 1,28,443.96 crore. While stating the quarterly numbers were not comparable with the last year’s quarter since the company got part of the first nine months' cash subsidy in the fourth quarter, IndianOil Chairman R S Butola said, “We have had great difficulty even in reaching this profit (Rs 3,954 crore). It was only due to the 100 per cent compensation provided by the government for losses on the sale of diesel, kerosene and domestic LPG.” The company’s share price gained marginally to close at Rs 265.50 on the BSE, having touched an intra-day high of Rs 271.
The decline in annual profit, Butola explained, was on account of a provisioning of Rs 8,157 crore on the entry tax obligation for its Mathura refinery, a loss of over Rs 1,052 crore on non-revision of the petrol price and a higher interest burden of Rs 2,918 crore due to a delay in government compensation that led to higher borrowings.
The Uttar Pradesh government had levied an entry tax of five per cent on crude oil used at the company’s Mathura refinery through the UP Entry Tax Act, 2007. IndianOil challenged this but its plea was rejected by the Allahabad high court in December last year. The company had then filed a special leave petition, leading the Supreme Court to issue an interim order on January 17 to stay the operation of the high court judgment, subject to IndianOil depositing 50 per cent of the accrued tax liability and arrears and furnishing a bank guarantee for the remaining amount.
Butola said the company would have to work out a scheme to offset the impact of the Mathura tax. He said the company got Rs 45,484-crore subsidy from the government to make up for almost all of the revenue it lost on selling diesel, domestic cooking gas and kerosene below cost during the 2011-12 fiscal. Of that, Rs 20,800 crore came in the fourth quarter. IndianOil had lost Rs 75,469 crore on selling diesel, domestic LPG and kerosene at government-controlled rates in the 2011-12 fiscal.
Of that, upstream oil companies such as ONGC gave Rs 29,961 crore. After the government subsidy of Rs 45,486 crore, the company had to absorb just a Rs 22.37-crore loss on the three fuels.
The company incurred an interest cost of Rs 5,590.54 crore during the last fiscal due to higher borrowing. Its borrowing rose from Rs 52,734 crore as on March 31, 2011 to Rs 75,447 crore on March 31, 2012. It has further increased to Rs 88,000 crore.
For the year ended March 31, 2012, the net profit stood at Rs 3,954.62 crore against Rs 7,445.48 crore even as net sales for the entire fiscal rose 32 per cent to Rs 4,32,823.98 crore.