State-owned Indian Oil Corp (IOC) today posted 29.7% drop in net profit for the fourth quarter ended March 31 because of rise in losses arising from selling fuel at government controlled rates.
Net profit in the January-March quarter stood at Rs 3,905.16 crore from Rs 5,556.77 crore a year ago, IOC Chairman R S Butola said here.
IOC had to absorb Rs 4,845 crore of loss on fuel sales during 2010-11 fiscal after accounting for cash subsidy from the government and assistance from upstream firms ONGC/GAIL.
"There were Rs 3,803 crore of net under-recovery (revenue loss) on diesel, domestic LPG and kerosene during 2010-11. Also, there was an under-recovery of about Rs 1,000 crore on petrol as we did not raised prices in line with international parity despite government freeing petrol price from control in June last year," he said.
The under-recovery on controlled products of diesel, domestic LPG and kerosene was Rs 650 crore higher than the previous year.
Besides, the company had to incur Rs 1,500 crore in interest on borrowings it had to resort to because government did not release cash subsidy in time. Higher depreciation was also a factor for the dip in profits.
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"But these factors, our net profit in 2010-11 would have been higher than the previous year's" he said.
IOC got Rs 22,604.84 crore in cash fuel subsidy and Rs 16,703.73 crore from upstream firms ONGC/GAIL.
The company is still losing Rs 4.58 per day on petrol even after the steep Rs 5 a litre hike from May 15. From June 1, which will take into account the average international price of the second fortnight of May as against the average of first fortnight of May that was taken into account for the steep hike, the under-recovery will come down to Rs 1.15 per litre.
After adding VAT, the desired increase in price of petrol in Delhi is Rs 1.35 per litre, Butola said.
IOC earned $7.82 on processing every barrel of crude oil Q4 of 2010-11 as against a gross refining margin of $3.38 per barrel in the year ago period.
Butola said the company's borrowing had risen to Rs 52,734 crore on March 31, 2011 from Rs 44,566 crore on March 31, 2010. Since March, borrowing have increased by more than Rs 15,000 crore to Rs 67,800 crore currently.
"If our compensation (for selling fuel below cost) is not increased, we will have to borrow Rs 5000-6000 crore every month," he said.
IOC net profit fell to Rs 7,445 crore in 2010-11 fiscal from Rs 10,221 crore in the previous year.