With 30% lower Q4 profit, IOC mulls Rs 1.35/ltr petrol price hike
New Delhi 31-May-2011
Mr. R.S. Butola, Chairman, IndianOil
Consumers could brace for another hike in the price of petrol by about Rs 1.35 a litre. State-owned fuel marketer IndianOil (IOC) is weighing the price elasticity of petrol to decide whether to go for another hike to reduce its losses from selling the fuel below cost. IOC chairman RS Butola indicated that the company was waiting for the right time for a moderate price increase that would not cause demand to fall.
"While it is imperative to increase the price of motor spirit (petrol), we are mindful of the fact the market takes time to absorb the recent rise in price. We are reviewing the situation every day and are waiting for the right opportunity. We will have to make it (a price increase) acceptable," Butola told reporters after announcing the company's fourth quarter results. The desired price increase would be Rs 1.35 a litre, the IOC chairman added.
IOC is making a loss of about Rs 4.50 a litre on petrol although prices were revised on May 15 by Rs 5, the steepest increase so far after the fuel was decontrolled last June. Since the price decontrol, petrol price has gone up by Rs 15.40 or 32 per cent in Delhi as the Indian basket of crude oil has been ruling at an average $117 a barrel so far this fiscal, compared to last fiscal's average of $85 a barrel.
IOC reported a 29.72 per cent decline in net profit growth for the fourth quarter ended March 31, 2011, to Rs 3,905 crore due to delays in receipt of cash subsidy from the government of India. Despite an increase in the gross refining margin to $7.8 a barrel in 2010-11from $3.38 a barrel the year before, IOC's net profit for the year declined 27.15 per cent. Gross turnover went up 30 per cent to Rs 93,843 crore in the fourth quarter from Rs 71,872 crore in the same quarter a year ago. For the whole year, gross turnover touched, Rs 3,28,744 crore, from Rs 2,71,095 crore., a growth of 22 per cent.
IOC's net sales in the fourth quarter rose 31 per cent to Rs 86,880 crore, while the same jumped 22 per cent in the whole 2010-11 fiscal to Rs 3,02,954 crore.
Butola attributed the slower growth in profits to higher interest payments due to delayed subsidy receipts, high depreciation and some losses from its latest venture -polymer business.
IOC's borrowings have skyrocketed to Rs 67,880 crore in 201011. Last year, the company had to borrow Rs 1,500 crore, just because of delay in receiving fuel subsidy. In 2010-11, IOC had to absorb a loss of Rs 4,848 crore due to selling fuel below cost. Of this, Rs 1,048 crore is from selling petrol below cost.
Upstream companies like ONGC, Gail India and Oil India and the government shares part of the subsidy burden.
