Riding on lower crude oil prices and a reduced under-recovery, Indian Oil Corporation (IOC), the country’s largest oil marketing company, has reported a net profit of Rs 284 crore for the quarter ended September 30, compared to a loss of Rs 7,047 crore in the corresponding quarter last year. Net sales, however, declined 18.7 per cent to Rs 60,392 crore on account of lower prices of petroleum products.
The company, that incurs losses on selling auto and cooking fuels at the government-controlled price, was able to show profit on account of Rs 1,799 crore of discounts given out by Oil and Natural Gas Corporation, GAIL, Oil India and CPCL. “The under-recovery on account of non-realisation of market-related prices for PDS kerosene and domestic LPG for the quarter was Rs 4,175 crore against Rs 4,950 crore in the same quarter last fiscal,” said B M Bansal, director (planning and business development).
Oil bonds would have boosted profit further. The company has not been issued any for the first half of the current year for losses on sale of cooking fuels. These bonds issued by the government help the company to show book profits. It is currently holding bonds worth Rs 24,300 crore.
The company’s gross refinery margin (GRM) or the difference between the cost of crude and price of the refined product for the quarter stood at $3.62 a barrel compared to a negative margin of $4.07 in the corresponding quarter last year. GRM helps the government-owned marketing companies to offset their loss partially. Since IndianOil has a higher refinery capacity of about 60 million tonnes, it is able to show profit despite around 50 per cent share in the loss-making marketing business. Global crude oil prices, that peaked at $147 a barrel in July 2008 averaged $68 a barrel in July-September 2009, helping IndianOil improve performance.
The company’s borrowings currently are also lower at Rs 47,912 crore, compared to the same period last year when it stood at Rs 60,000 crore.
The company is, however, not content with the performance. “Last year was an aberration. We had high inventory loss, forex loss and interest cost was high. So, this year is not indicative that we have done well,” said S V Narasimhan, finance director. “We need to have a profit of at least Rs 2,000 crore to Rs 2,500 crore every quarter to generate internal resources for our capital expenditure.”