Oil refining PSUs net up 30%

It's boom time for public sector oil refining and marketing companies. Buoyed by a surge in refining margins and a windfall in the form of sharing of under-recoveries on subsidised LPG and kerosene by upstream companies, the downstream sector has notched up unexpected profits during the first three quarters of the current fiscal.

In case the trend continues, industry hopes that these companies would record a more than 40 per cent increase in their average net profits during the entire 2003-04.

The net profit of the three downstream oil PSUs "" Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) ""in the first nine months of 2003-04 have jumped up between 31.67 per cent and 60 per cent.

While IOC's net went up from Rs 3,915 crore in the first three quarters of 2002-03 to Rs 5,155 crore during the same period of the current fiscal, the corresponding figures for BPCL are Rs 802.6 crore and Rs 1,280.7 crore, and for HPCL Rs 905 crore and Rs 1,376 crore respectively.

A quick look reveals that most of the gains came in the third quarter only when the government asked the upstream Oil and Natural Gas Corporation and Gail (India) Ltd to share the under-recovery burden of these companies.

As a result, IOC's net in the third quarter jumped from Rs 777 crore last year to Rs 2,403 crore this year "" an increase of 209 per cent. BPCL's net in the third quarter also more than doubled from Rs 233 crore to Rs 484.3 crore this year.

Part of the credit for this rosy picture goes to the refining margins which have remained reasonably high during the fiscal so far. Refining margins are the differential between crude and product prices.

While IOC says its refining margins so far this year have averaged around $4 a barrel against $2.79 a barrel during the corresponding period of last year, BPCL's refining margins have been $ 3.36 a barrel against $ 2.99 a barrel last fiscal.

On the flip side, ONGC, which had to bear the major brunt of compensating the marketing companies for under-recoveries, recorded a fall in its net profit which dipped from Rs 6,850.86 crore in the first nine months of the last fiscal to Rs 6,678.07 crore in the corresponding period of 2003-04.

During the third quarter of the current fiscal, when ONGC had to pay for even the first two quarters' under-recoveries, its net dropped from Rs 2,593 crore to Rs 1,718.53 crore.