Indian Oil Corporation (IOC), the country’s largest oil marketing company, is likely to incur losses in the second quarter ended September 2008, as it continues to sell oil products at below the production cost, said a senior company official.
The company, 80 per cent of which is owned by the Central government, is also projected to report refinery margins of $6-7 a barrel during the three months ended September 2008, around $10 a barrel lower, compared to three months up to June 2008. This is mainly because of inventory loss, where IOC purchased crude oil at high prices in June and July this year but the value of these stocks have dipped around 40 per cent with global oil prices falling.
“We may incur losses for selling oil products at a discount if the government does not revise the subsidy-sharing mechanism,” IOC finance director SV Narasimhan said on the sidelines of an energy conference.
The company reported a quarterly loss for the period January–March, 2008, but it managed to make a profit for the full-year ended March 2008.
Indian Oil reported a profit of Rs 415 crore in the first-quarter ended June 2008. In the same quarter, the company accounted for oil bonds worth Rs 1,352 crore and discounts worth Rs 6,234.78 crore from oil producers Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL).
The government bears around 50 per cent of the total under-realisation of the oil marketing companies by giving them oil bonds. The three companies – IOC, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – do not have any bonds at the moment and are not likely to get any bonds till the end of October. The bonds will arrive only after the Parliament clears the issue under the supplementary demand for grants. The Parliament is scheduled to meet again on October 17.
“The projection is that losses will be made even after accounting for oil bonds that we may get for the July-September quarter,” said another official with the company. But he did not quantify how much of oil bonds they will include while preparing the second quarter accounts.
