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The credit quality of state-owned fuel retailers like IOC and upstream firms like ONGC will likely to weaken during rest of current fiscal if the government continues to ask them to share higher fuel subsidies, Moody's Investors Service said today.
Moody's said fuel retailers may end the fiscal on March 31, 2014 with a revenue loss of Rs 140,000 crore to 150,000 crore on selling diesel, domestic cooking gas (LPG) and kerosene at government controlled rates. This is higher than Rs 130,000 crore under-recovery or revenue loss expected in June.
"The reason for this upward revision is the ongoing depreciation of the Indian rupee (about 10 per cent since June) and rising crude oil prices (about 6 per cent)," it said.
Of the Rs 25,579 crore the retailers lost in April-June quarter, the government provided only 31 per cent or Rs 8,000 crore. The rest of the losses were split between upstream firms (Rs 15,304 crore) and retailers (Rs 2,275 crore).
The cash subsidy provided by finance ministry was lower than Rs 11,451 crore sought by oil ministry, it was also lower than 52.78 per cent of the Rs 161,029 crore revenue loss being made up through cash subsidy support of Rs 85,000 crore in 2012-13 fiscal.
"The credit quality of state-owned oil marketing and upstream oil companies in India will likely weaken for the rest of FY2014 (April 2013 March 2014), if the government continues to ask them, as it did in April-June, to share a higher burden of the country's fuel subsidies," Moody's said.
Moody's said it expects the government will fully reimburse marketing companies by the end of FY2014 and reduce the burden on upstream companies.
The April-June quarter results for oil marketing firms were negatively affected by a higher portion of the fuel subsidies, which was somewhat offset by higher refining margins. "The results for upstream companies were weaker because of lower crude oil prices," it said.
State-owned oil marketing companies, Indian Oil Corp (IOC, Baa3 stable) and Bharat Petroleum Corp Ltd (BPCL, Baa3 stable), and the upstream Oil and Natural Gas Corp (ONGC, local currency: Baa1 stable, foreign currency: Baa2 stable) reported weak results for April-June 2013.
"However, on a normalised basis -- after excluding the effects of the fuel subsidies and foreign exchange losses -- EBITDA for both IOC and BPCL improved from a year ago, owing to higher gross refining margins and marginally higher sales volume," it said.
Compared to April-June 2012, or the first quarter of FY2013, IOC's EBITDA more than tripled to Rs 4,560 crore while BPCL's grew 56 per cent to Rs 2,760 crore.
For ONGC, after excluding one-off expenses relating to its employee benefit scheme, EBITDA fell 11 per cent from April-June 2012 to Rs 9,7300 crore.
