IOC, BPCL slip on low prices

PSUs suffer losses as govt keeps prices in check.

The government's reluctance to raise the retail price of petroleum products in line with international crude oil prices has resulted in the country's two largest oil companies, Indian Oil Corporation and Bharat Petroleum Corporation Ltd (both Fortune 500 companies), registering a quarterly loss for the first time in their history.

IndianOil today reported a loss of Rs 54 crore for the April-June 2005 quarter, against a profit of Rs 1,472 crore for the same quarter a year ago, though its turnover rose 19 per cent to Rs 42,340 crore from Rs 35,577 crore during the period.

Things could take a turn for the worse in the current quarter for India's largest company as the non-revision of auto fuel and coking fuel prices are expected to result in a revenue loss of Rs 1,800 crore in July.

BPCL suffered a loss of Rs 431.3 crore during April-June 2005, compared with a net profit of Rs 147.3 crore during the same quarter in the previous year. The company's total income rose 22.7 per cent to Rs 16,098.3 crore during the quarter.

On Thursday, IBP Ltd, an IndianOil subsidiary, had reported a net loss of Rs 233.97 crore during April-June 2005, against Rs 8.65 crore during the first quarter of 2004.

Similarly, Bongaigaon Refinery and Petrochemicals Ltd, another IndianOil subsidiary, reported a 48 per cent fall in its net profit to Rs 68.80 crore during April-June 2005.

During the quarter, IndiaOil had to bear gross under-recoveries of Rs 4,868 crore because of selling LPG, kerosene, diesel and petrol below the import parity price.

The burden was partially offset after upstream companies shared Rs 1,674 crore of the losses, bringing the net under-recoveries down to Rs 3,194 crore.

BPCL's under-recoveries were estimated at around Rs 2,100 crore, of which Rs 1,200 crore were on account of selling petrol and diesel below import parity prices, while the rest came from losses on the sale of cooking gas and kerosene.

The cost of crude for Indian companies went up from around $51 a barrel in April to around $56 a barrel at the end of June.

While the oil companies pressed for a corresponding hike in domestic retail prices, the Left parties, which are supporting the United Progressive Alliance government, were opposed to the move.

Petroleum Minister Mani Shankar Aiyar had also sought a reduction in Customs and excise duties to help contain the losses but the finance ministry was opposed to the idea, saying a move like this would affect the revenue collections.

IndianOil Chairman Sarthak Behuria today reiterated his demand for an immediate hike in petroleum product prices to cover the losses.

Behuria said the first quarter losses could force the company to review its plans of investing Rs 7,000 crore during the year. While the company is expected to revisit its ambitious plans of mergers and acquisitions abroad, he said, "The problem existed earlier but now it has got terribly aggravated."

IndianOil executives said the company had sought the government's permission to sell a 4.83 per cent stake in Gail (India) Ltd and a 9.61 per cent holding in Oil and Natural Gas Corporation. The move is expected to help IndianOil raise funds for financing its investments.

Behuria said the government would need to find a solution, other than subsidy-sharing by companies. This, he felt, could be through a combination of changes in prices and duties or issue of bonds.

While IndianOil recorded a 3.3 per cent drop in diesel sales and a 6 per cent drop in naphtha sales, BPCL recorded a fall of 13 per cent in diesel sales and about 1 per cent slide in petrol sales.

IndianOil's gross refining margin fell to $6.16 a barrel at the end of June 2005, against $6.87 a barrel during the first quarter last year. On the other hand, BPCL's gross refining margin went up to $ 5.41 a barrel in the first quarter this year, from $5.17 a barrel during April-June 2004.