| Paying the price
New Delhi, July 29: Indian Oil has suffered its first-ever loss, its books scorched by the government’s policy of shielding consumers from the flare-up in global crude prices.
The Fortune 500 company’s financials were smudged by a red ink of Rs 54 crore in the first quarter of this year against a profit of Rs 1,472 crore same time last year. Bharat Petroleum was its sibling in distress, its balance-sheet throwing up a loss of Rs 226 crore compared with a profit of Rs 375 crore in the year-ago period. Hindustan Petroleum, whose numbers are due on Saturday, is feared to be hurtling down the same road.
IOC chairman Sarthak Behuria said losses were the result of the Rs 3,194-crore that has not been recovered from the sale of petrol, diesel, kerosene and cooking gas at prices which even now cover only 20 per cent of the rise in global crude rates since November last year. Refiners were allowed to raise prices of petrol and diesel on June 20, the first revision after November. The price of liquefied petroleum gas was last raised on June 15, 2004, while kerosene prices have not changed since April 2002.
IOC finance director S.V. Narasimhan said he saw the losses spilling over into the second quarter ending September 30 if fuel prices are not allowed to go up. Behuria put the July drain alone at a staggering Rs 1,800 crore.
Floundering finances of IOC, BPCL and IBP ' which was in the red by Rs 233 crore ' could force the Centre to take the hugely unpopular decision of ramming through a fresh hike in fuel prices and risk antagonising the Left parties already livid about other reform initiatives.
Indian Oil lost Rs 1,362 crore on petrol and diesel sales; it could have raked in another Rs 1,832 crore, if it had been allowed to sell LPG and kerosene at market prices.
The public sector oil companies are losing Rs 92 on every LPG cylinder and Rs 11 per litre on kerosene. They are reimbursed only a third of the subsidy on the two fuels.
Left to Behuria, petrol and diesel will cost Rs 3.63 and Rs 4.15 more to shore up current prices to international rates. He will never have that kind of freedom. His company will find itself chained too, when it wants to push big investments and new projects it needs for growth.
One of the plans that could be squashed under the government’s petro-price caps is the Paradip refinery that Indian Oil has long planned and is about to execute.
Behuria said such projects are planned in line with the firm’s high profitability. “Internal accruals form an important part of financing these projects and if the company slips into losses, these cannot be taken up,” he added.
Investments to the tune Rs 35,000 crore have been planned by the oil major for diversifying into petrochemicals and exploration over the next five years. A bleeding IOC can hardly afford to be ambitious.