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| OMCs uncertain, but producers certain about future |
| Ajay Modi / New Delhi Aug 06, 2010, 01:41 IST |
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The future looks bleak for oil marketing companies (OMCs), despite decontrol of petrol prices and increase in prices of other petroleum products. But oil producers like ONGC (Oil and Natural Gas Corporation) and OIL (Oil India) are optimistic about their future performance.
The OMCs — Indian Oil Corporation (IOC), Bharat Petroleum Corporation and Hindustan Petroleum Corporation — posted a combined net loss of Rs 6,990 crore for the June quarter, as their underrecoveries of around Rs 13,500 crore remained uncompensated. The gross underrecoveries for the quarter stood at around Rs 20,000 crore. Of this, roughly one-third, or Rs 6,600 crore, was borne by upstream companies like ONGC and OIL.
The government, which freed petrol price and increased diesel, kerosene and LPG prices in June, is yet to come out with subsidy sharing mechanism for the underrecoveries. The gross underrecoveries in 2010-11 on petrol, diesel, kerosene and LPG (till June 25) are estimated at Rs 53,000 crore, considering an average crude oil price of $75 a barrel.
“While no provision (for underrecoveries) has been made in the Budget of current fiscal, we have requested the finance ministry to provide Rs 13,500 crore,” said Petroleum Secretary S Sundareshan.
S V Narasimhan, director (finance), Indian Oil, which incurred a net loss of Rs 3,388 crore in the first quarter, said their future performance would depend on government compensation.
The upstream oil companies, led by ONGC, have also seen a dip in their net profits for the June quarter. They, however, are buoyant about their performance in the remaining three quarters, on declining subsidy and higher price of gas. Of the estimated Rs 53,000-crore underrecoveries for the year, roughly one-third, or Rs 17,666 crore, has to come from the upstream sector. Considering that they have already paid Rs 6,600 crore in the first quarter, they may have to pay another Rs 11,000 crore over the remaining three quarters.
“We should be able to show better results going forward on account of the increase in price of administered price mechanism (APM) gas which happened from June 1. There will also be a lower subsidy burden going forward,” said ONGC Chairman and Managing Director R S Sharma.
| FIRST QUARTER FACT SHEET |
| Company |
Net sales (in Rs crore)
in Q1 ended June 30 |
Net profit/loss
(in Rs crore) |
| IOC |
71,672 |
-3,388 |
| HPC |
29,219 |
-1,884 |
| BPC |
34,211 |
-1,718 |
| ONGC |
13,665 |
3,661 |
| OIL |
1,523 |
501 |
| Source: BSE |
The company saw its net profit declining 24.5 per cent to Rs 3,661 crore, since its subsidy burden jumped from Rs 429 crore to Rs 5,515 crore. The government has more than doubled the price of APM gas to $4.20 per million British thermal units. The increase in gas price is expected to add up to Rs 900 crore annually to the company’s bottom line.
OIL, whose net profit declined by 32 per cent, is also upbeat on its future performance. “We are hopeful that the subsidy burden shall come down in the remaining quarters,” said N M Borah, chairman and managing director.
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