Indian Oil Corp (IOC) today posted India’s biggest quarterly net loss by a listed company of Rs 22,451 crore after the government failed to compensate it for capping auto and cooking fuel prices.
Simultaneously,Hindustan Petroleum Corp Ltd (HPCL),the nation’s third largest fuel retailer,also posted a net loss of Rs 9,249 crore in April-June,the second biggest quarterly loss by a listed corporate.
The government has in the year year not compensated oil firms for selling diesel,domestic LPG and kerosene below cost this year as the Rs 40,000 crore fuel subsidy it had budget has all been exhausted in paying compensation for last fiscal.
Bharat Petroleum Corp Ltd (BPCL),India’s second largest fuel retailer,will report quarterly earnings tomorrow and is likely to post over Rs 9,000 crore of net loss.
IOC,which like other retailers is living off borrowed money,warned that it may soon exhaust the limit to which it can take debt and sourcing crude oil (raw material for making petrol,diesel and other petroleum products) would become difficult as international sellers don’t give credit.
The three state-run fuel retailers are losing about Rs 710 crore per day on selling diesel,domestic cooking gas (LPG) and kerosene at government controlled rates which are way below market price.
Besides,the government’s “inflationary concerns” have not allowed them to raise price of petrol – a fuel that was deregulated in June 2010 – even though they are losing over Rs 3 per litre.
IOC Chairman R S Butola said the government should realise that oil firms are on the brink of collapse and fuel subsidies need to be addressed urgently.
The three fuel retailers are projected to lose a record Rs 177,715 crore this fiscal as they sell diesel at a discount of Rs 12.13 a litre to its cost,kerosene at Rs 28.54 and LPG at Rs 231 per 14.2-kg cylinder discount.
The government,which is struggling to contain budget deficit and runaway inflation,has not just failed to compensate state-run retailers for selling fuel below cost this fiscal but also not provided about Rs 10,000 crore of the promised subsidy for 2011-12.
What has made matters worse is rupee’s slump against the US dollar,making import of crude oil costlier. The nation relies on imported crude to meet is almost 80 per cent need.
“We had a net loss of Rs 22,450.95 crore in April-June quarter as compared to Rs 3,718.70 crore loss in the same period a year ago,” Butola said.
This was primarily because IOC was not compensated Rs 17,485 crore for selling diesel,domestic LPG and kerosene at a discount to its cost and another Rs 950 crore lost on selling below its cost.
The delay in getting compensation has increased PSU oil firms’ interest payments on debt they have taken for buying crude oil among other things.
IOC’s borrowings have gone up by a masive Rs 15,000 crore in the April-June quarter to Rs 90,923 crore.
The company can borrow a maximum of Rs 110,000 crore and if losses on fuel sales continue that borrowing limit will soon be reached,after which it will not get any finances impacting the company’s ability to buy crude oil from international markets,he said. The company’s debt-equity ratio has deteroriated ato 2.57:1.
Also,its capital expenditure will have to be pruned.
“As of now capex funding has been tied-up. Overall,if financial constraints continue to play in remaining part of the year,there is bound to be impact,” he said.
Shares of IOC fell 1.8 per cent to Rs 251.60 at the close on BSE,the lowest level since June 19.
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PSU oil cos seek immediate hike in petrol price
New Delhi,Aug 9 (PTI) With losses widening to Rs 3.56 per litre,public sector oil firms today sought an immediate hike in petrol price but were unsure if the government will allow them to do so.
State-owned oil firms had last hiked petrol price by Rs 0.70 per litre with effect from July 24 and since then global oil rates have soared more than USD 12 per barrel.
“We are losing Rs 1.37 per litre on petrol based on the average price of benchmark gasoline rates in the Singapore market in the previous fortnight. But current calculations based on oil price this month will be about Rs 3.56 a litre,” said R S Butola,Chairman,Indian Oil Corp,the nation’s largest fuel retailer.
Petrol was deregulated or freed from government control in June 2010 but rarely have prices moved in tandem with the cost.
The oil firms had pressed for raising rates by Rs 1.37 a litre earlier this month but the government discouraged them from doing so in view of the monsoon session of Parliament.
It appears hugely unlikely that prices would be hike during the sitting of the Parliament,which began on August 8 and will continue till September 7.
“We have deliberated this matter and also appraised our Board… We are taking up the matter with the government,” he said.
“Yes,there is a case for increasing petrol prices and we are pressing for it… (but) when inflation is high,there are bound to be difficulties (in increasing prices),” he said.
The oil firms,he said,want decontrol to be taken back and the petrol be brought under administrative control so that losses on selling the fuel below cost can be compensated from the Budget like it is done in case of diesel,domestic LPG and kerosene.
Asked if the PSUs had the freedom to raise petrol prices,Butola said,”we can certainly (hike rates) but we are working in an environment and their are concerns that consumers should not be unnecessarily burdened,” he said.
Butola said when the government last fiscal made good a record Rs 138,000 crore of revenue losses on sale of diesel,domestic LPG and kerosene,another Rs 4,980 crore subsidy for petrol could also have been provided.
In absence of subsidy support,the oil firms had hiked rates by a massive Rs 7.54 a litre in May though they followed it up with reductions of Rs 2.02 per litre from June 3 and Rs 2.46 a litre on June 29.
But they had to again raise rates by Rs 0.70 per litre last month and are demanding another hike.
Butola said this fiscal IOC and two other fuel retailers – Bharat Petroleum and Hindustan Petroleum – are projected to lose a record Rs 177,715 crore in revenues as they sell diesel at a discount of Rs 12.13 a litre to its cost,kerosene at Rs 28.54 and LPG at Rs 231 per 14.2-kg cylinder discount.
Another Rs 6,813 crore is projected to be lost on petrol sales and this too can be easily compensated by the government if the controls are brought back,he said.