State refiners hit by oil slump, subsidy payout cushions fall

NEW DELHI (Reuters) - Indian state refiners reported large losses on inventory for the third quarter, hit by the rapid decline in global oil prices, though some were helped by swift payment of government subsidies to compensate for its regulation of retail fuel prices.

Indian Oil Corp Ltd, the country's largest refiner, was hit hardest and on Friday reported a net loss of 26.37 billion rupees ($425 million) in the three months to Dec. 31, against a loss of 9.61 billion rupees a year earlier.

Its loss on inventory, referring to the price impact in the time it takes to process crude and market the refined product, was 128.42 billion rupees ($2.07 billion) compared with a gain of 6.53 billion rupees a year earlier, Chairman B. Ashok told reporters.

Brent crude dived to less than $60 a barrel in December from a peak above $115 last June.

However, the government's swift payments to cover enforced low retail fuel prices offset losses on inventory for two junior refiners, officials said. Such payments are usually made months in arrears.

Despite the higher inventory hit and squeezed profit margins, Hindustan Petroleum Corp reported a narrower net loss of 3.25 billion rupees, while Bharat Petroleum Corp managed to post a profit of 5.51 billion rupees.

The three companies together lost 159.81 billion rupees in the quarter because of the price cap on retail fuel sales, against 397.25 billion rupees a year earlier, Reuters reported on Thursday.

The drop in those losses was because the government ended controls on pricing for diesel, which makes up about 40 percent of the country's demand for refined fuel.

"We have managed to post profit because of timely release of subsidy, operational efficiencies and optimisation of cost despite high inventory losses," said BK Datta, head of refineries at BPCL.

($1 = 62.0177 Indian rupees)

(Reporting by Nidhi Verma in New Delhi and Aman Shah in Mumbai; Editing by David Goodman)