Borrowings of Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) have jumped by over Rs 22,555 crore in the first five months of the current fiscal as government did not fully compensate them for losses incurred on selling fuel below cost.
The three firms had a combined borrowing of Rs 96,727 crore at the end of March, which has now risen to Rs 119,282 crore or over 23%, according to a presentation made at the Parliamentary Consultative Committee on Petroleum and Natural Gas here today.
They lose Rs 235 crore per day on selling diesel, domestic LPG and kerosene at government controlled rates, Oil Minister S Jaipal Reddy said in his speech before the presentation at the meeting.
Losses have forced the three companies to borrow heavily from the market even for their working capital requirement, which is leading to mounting interest burden on them.
"Due to increasing borrowings, oil marketing companies' interest cost has also increased -- from Rs 614 crore in 2003-04 to Rs 4,655 crore in 2010-1, which is likely to cross Rs 6,000 crore during the current year," the presentation said.
Reddy said revenue loss or under-recoveries have had a significant adverse impact on the financial health of the oil PSUs, with diminishing cash flows and reduced resource generation for capacity expansion and modernisation.
"If their financial health deteriorates on account of the price under-recoveries, their ability to discharge their assigned task of supplying the entire country with petroleum products would suffer," he added.
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IOC, the nation's largest oil firm, has seen borrowings rising to Rs 69,012 crore from Rs 52,734 crore as on March 31. BPCL has seen borrowings rising to Rs 22,820 crore from Rs 18,972 crore and HPCL from Rs 25,021 crore to Rs 27,450 crore.
"Delayed and insufficient compensation of under-recoveries is forcing oil marketing companies to resort to higher market borrowings to meet their capex as well as working capital requirements," the presentation said.
During April-June quarter, the three firms lost Rs 43,526 crore on selling diesel, domestic LPG and kersoene at government controlled rates. Of this, the government has agreed to make good 34% of Rs 15,000 crore. Another, Rs 14,509 crore has been provided by oil producers like ONGC, leaving Rs 14,017 crore unmet gap.
Rising borrowings have also resulted in deterioration of debt-equity ratios. IOC's debt-equity ratio as on March 31 was 0.95:1, that of BPCL 1.35:1 and of HPCL was 1.99:1. This has slipped to 1.31:1 for IOC, 2.24:1 for BPCL and 2.71:1 for HPCL.