IOC against privatisation — Pathan

Investor sentiments are slightly depressed vis-a-vis oil companies due to the process of liberalisation not being in line with the targeted phased deregulation of oil sector by 2002, Pathan said.

While refining margins were under pressure due to increase in global crude oil prices, marketing margins have been pegged at the same of level of 12 per cent post-tax returns since 1996, he said.

IOC’s outstanding with oil pool, which crossed Rs 5,500 crore, were likely to increase due to the growing disparity between domestic selling prices of petro products and international crude prices, Pathan added.

Pathan hinted that disinvestment of other oil company will take place before the government decides to divest its 10 per cent equity in IOC. Post-buyout of stand-alone refineries of Chennai Petroleum Corporation Ltd (CPCL) and Bongaigaon Refinery and Petrochemical Ltd (BRPL), the company would like to further consolidate its position, he said, adding CPCL and BRPL would be a separate subsidiary of the Fortune 500 company after the buyout.

Stating that IOC would invest in both the refineries for their expansion plans, Pathan said stand-alone refineries would not be able to sustain themselves in the deregulated scenario and need support to face competition.

"We will support the refineries in expanding capacity and protect their interest in face of competition in the deregulated scenario," he said. Pathan said IOC would become a Rs 100,000 crore company during the current fiscal with estimated net profit of Rs 2,700 crore while outlining its investment plans of about Rs 60,000 crore by the end of the Tenth Plan period (2007).

"We expect to sell about 50 million tonnes of products and our sales will touch Rs 100,000 crore… we should post net profit of about Rs 2,700 crore," Pathan said. He said the corporation envisaged an investment of Rs 22,674 crore during the Ninth plan and Rs 34,592 crore during the subsequent five years for both expansion and diversification.

Acquisition of Chennai Petroleum Corporation Ltd and Bongaigaon Refinery and Petrochemical Ltd would not be at the cost of our existing investment plans, Pathan said adding that IOC had sufficient flexibility and capability to undertake the investment for which it would shortly write to government.

Asked about the valuation of the two refineries, where Cabinet decided to sell the government’s entire stake to IOC, Pathan said "we will definitely like to have current market prices… we will soon complete due diligence report and write to government,."

The company had done preliminary valuation of the two refineries last year and would be updating it based on the market price, net present value and returns expected in future, he added.

Refining margins of IOC, which posted a 10 per cent increase in net profit to Rs 2,443 crore in 1999-2000 compared to Rs 2,214 crore in the previous year, have come under pressure during the first quarter of the current fiscal due to the steep hike in international crude oil price, Pathan said.

"Things are likely to improve from the second quarter and we expect to maintain the 19 per cent net profitability compared to total net work," he said adding margins had also been affected due to high rate of depreciation.

The Fortune 500 company is presently implementing a nine million tonnes grass root refinery at Paradip in Orissa at an estimated cost of about Rs 8,400 crore.

Other major projects include Rs 4,392 crore residue upgradation project at Gujarat Refinery and Rs 4,228 crore facilities for production of Paraxylene/PTA at Panipat Refinery, he said.

IOC has also undertaken a Rs 3,365 crore expansion project at Panipath Refinery to increase capacity to 12 million tonnes and Rs 1,803 crore expansion project at Barauni Refinery, he said.

Besides expansion of refining and pipeline capacities and marketing infrastructure, future investments cover vertical integration and diversification in petro chemicals, power, oil exploration and production, liquefied natural gas and other fuels, he added.