IOC fears Rs 12,000-cr loss in '09-10

Says government needs to increase subsidy on kerosene and LPG

Indian Oil Corporation (IOC) has said that if the government does not increase the subsidy amount given to it for losses incurred on sale of cooking fuels, the company will end the year with a revenue loss of Rs 12,000 crore.

IOC is currently losing about Rs 110 crore per day on selling fuels below cost. It lost Rs 5.42 per litre on petrol, Rs 3.65 a litre on diesel, Rs 17.23 on every litre of kerosene sold through the public distribution system (PDS) and Rs 299 per 14.2-kg domestic LPG cylinder.

While losses on petrol and diesel for the quarter ended December 31, 2009, were fully made up by Oil and Natural Gas Corporation as well as Oil India Ltd, the government's cash compensation of Rs 7,100.18 crore left most of IOC's domestic LPG and kerosene losses uncovered.

Out of the total government support, the company accounted for Rs 4,482.49 crore in the third quarter. "After accounting for Rs 4,482.49 crore in one quarter, even though it was for the first nine months, we had a net under-recovery (revenue loss) of Rs 800 crore," IOC Chairman Sarthak Behuria said after announcing the results.

The compensation received was inadequate to cover for LPG and kerosene losses and, if it was not increased, the company would end the year with a revenue loss of Rs 12,000 crore, he said.

In fact, the 76 per cent dip in IOC's net profit for the quarter ended December, 2009, came even as the company's refining margin was better than the previous year's same quarter margin. Refinery margins help downstream companies to make up for the losses incurred on the marketing business due to non-revision of auto and cooking fuels in line with international prices.

The October-December 2009 net profit stood at Rs 696.59 crore, compared with Rs 2,958.59 crore during the same period a year ago. The company's refining margin, or earnings from processing every barrel of crude, stood at $3.64 (nearly Rs 170) a barrel in October-December 2009 compared to minus $1.98 (minus Rs 91) in the year-ago period.

For the nine-month period ended December 31, 2009, the biggest petroleum retailer in the country posted a net profit of Rs 4,663.78 crore, compared with a net loss of Rs 3,673.41 crore during the year-ago period. This makes the situation appear better this year, despite the delay in release of compensation by the government.

Under-recovery on account of non-realisation of market-related prices for superior kerosene oil (PDS) and LPG (domestic) during the nine-month period ended December 31, 2009, was Rs 7,936 crore, compared with Rs 7,539 crore in the corresponding period of the previous year for petrol, diesel, PDS kerosene and LPG (Domestic). The underrecoveries were after considering an upstream discount of Rs 4,303 crore and budgetary support of Rs 4,483 crore from the government.