IOC posts Rs 3,388-cr loss as refining margin slumps
New Delhi   25-Jul-2010

IndianOil (IOC) posted a loss of Rs 3,388 crore in the first quarter of the current fiscal ended June 2010 compared with a profit of Rs 3,683 crore for the same quarter last year. This was mainly because of unmet under-recoveries, lower refining margins, and foreign exchange variation losses.

Speaking to newspersons after the board meeting, the IOC Chairman, Mr B.M. Bansal, said, "the under-recovery on account of non-realisation of market-related prices for petrol, diesel, PDS kerosene, and domestic LPG for the quarter was Rs 7,343 crore." The company incurred the loss as it had to sell petrol, diesel, domestic LPG and PDS kerosene below the market price and was not compensated by the Government for it.



IOC's gross turnover went up 22.72 per cent to Rs. 77,965 crore (Rs 63,530 crore). The company incurred a revenue loss of Rs 11,013.85 crore during the quarter on the four petroleum products, out of which it got compensation of Rs 3,671.26 crore from the upstream companies - ONGC, GAIL (India) and Oil India. The upstream companies extend discount on crude oil and products they sell to the retailers to partially compensate them for the under-recoveries. However, the recent Government decision to decontrol petrol prices and increase the prices of diesel, domestic LPG and PDS kerosene may help IOC improve profitability in the second quarter, industry trackers feel. Also, the Government is expected to put in place a burden-sharing mechanism for the rest of the year to compensate oil companies for selling products below the market price.

Mr Bansal said the company's gross refining margins (GRM) for the quarter shrank to $3 a barrel against $7.36 in the corresponding previous quarter due to high crude oil prices. GRM is the difference between the total value of petroleum products and the price of crude oil. The company also suffered exchange losses due to rupee depreciation and higher provisioning of bonds.