Covid-19 impact: BPCL capital expenditure in FY21 to be nearly 27 pc lower

The company plans to spend Rs 8,000-8,500 cr in FY21 compared to Rs 11,000 cr in FY20

State run Bharat Petroleum Corporation (BPCL) has scaled down its capital expenditure in the wake of reduced project activity and lower profitability. The company will now invest about 20 per cent less in the current financial year as capital expenditure.

BPCL spent around Rs 11,000 crore as capital expenditure at a gross level in FY20.

“As the country was under lockdown, we have not spent much in April and May. We are planning to spend around Rs 8,000 to 8,500 crore for FY21,” said N Vijayagopal, director (finance) for BPCL. He added the company would have spent Rs 10,000-11,000 crore a year as capital expenditure.

Vijayagopal pointed out it has been difficult to continue with project (construction) work for the last two months. This, in turn has also impacted planned capital expenditure. “We were forced to scale it (capex) down because there was no project activity for the two months and we did not know when it will be normal activity. In spite of our best efforts, project activities did not run the way we could run our refinery and other activities," he said.

The executive further added BPCL’s loss in the March quarter has also impacted its expansion plans. “By sheer slowing down of the economy and the lockdown of the country, the project activities will be lower this year. Also because our profitability is bad, we have also taken a decision not to accelerate expenditure on small minor projects up to Rs 150 crore.We are taking up essential minor projects.”

In the March 2020 quarter, BPCL reported a loss of Rs 1,819.56 crore, against a profit of Rs 3,131.66 crore a year ago. The executive added inventory loss and loss due to foreign currency fluctuations contributed to the weak financials.

BPCL’s capital expenditure plans, however, are open to review in October and the company will also look to reduce project development costs. “We will take a review in October. We will in October also take a fresh look if renewing contracts and finding more competitive cost structures for expansion is possible.”