Indian Oil posts Rs.70 bn loss, seeks more oil bonds (Third Lead)

October 31st, 2008 - 9:53 pm ICT by IANS  

New Delhi, Oct 31 (IANS) Urging the government to fully compensate its losses due to under-recovery from sale of subsidised fuel, Indian Oil Corp (IOC), which posted a loss of Rs.70 billion in the second quarter, has asked for an increase in the quantum of oil bonds issued by the finance ministry.India’s largest oil marketing company slipped into the red in the second quarter due to the depreciation of the rupee, erosion of inventory values and increase in interest expenditure.

In the second quarter last year, it posted a profit of Rs.38.17 billion. In the first quarter this year, IOC posted a net profit of Rs.41.51 billion. Its half-yearly loss this year is Rs.66.3 billion.

Together, the three state oil retailers have posted a net loss of Rs.128.78 billion for the second quarter. While Bharat Petroleum Corp announced a net loss of Rs. 26.2 billion, Hindustan Petroleum Corp reported a net loss of Rs.32.18 billion.

In the period under review, oil prices spiralled to as high as $147 mid-July, but have since been falling and are now hovering around $65.

According to IOC, the net under-realisation from the sale of subsidised transport fuels and cooking gas was Rs.12.27 billion in the first two quarters. This is four times the under-realisation of Rs.3.5 billion in the corresponding period last year.

IOC chairman Sarthak Behuria said the net under-realisation was the losses incurred by the company, even after the discounts from upstream companies and the government’s oil bonds.

To help it recoup its under-realisation, the state-run upstream company Oil and Natural Gas Corp (ONGC) has granted IOC discounts of Rs.14.4 billion for the second quarter.

IOC has also been allocated oil bonds worth Rs.25.08 billion from the government.

“In the mid-term, we just want the government to give us the money to recoup the losses,” Behuria said, adding that the government could discuss a possible fair and equitable mechanism for sharing the subsidy burden, which would be implemented from next year.

The average gross refining margin has also come down to $6.36 a barrel from $8.44 a barrel last year.

Petroleum Minister Murli Deora Thursday met Finance Minister P. Chidambaram to ask for a higher quantum of oil bonds for oil marketing companies, on account of massive losses in the second quarter.

The income has, however, increased from Rs.574.18 billion to Rs.869.87 billion this year - a rise of over 51.4 percent.

Interestingly, IOC will make profits from its petrol sales from Saturday. “Petrol margins will turn positive from tomorrow,” Behuria said.

The company would start making a profit of about Rs.4 per litre on petroleum, compared to the loss of Rs.2.85 in the second fortnight of October.

But, in the rest of the basket, it will continue to post losses. For diesel, the loss per litre will come down from Rs.7.26 to about Re.1.

The public sector undertaking has been losing Rs.29.19 per litre on kerosene - this gap will shrink to Rs.22 per litre.

But, IOC will be losing more on liquefied natural gas (LPG), with the per litre loss increasing from Rs.335 to Rs.343.

The daily under-realisation will come down from Rs.1.53 billion to Rs.800 million in November, with subsidy on kerosene and LPG accounting for the major part of subsidy losses.

Despite the profit on petrol, Behuria said that any “softening of price” was not feasible right now. “It is too early for passing on any softening in international oil prices,” he said.

Behuria said that international prices were too volatile and any decision on price cut had to be taken on the basis of monthly average.

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