New Delhi, June 8: Indian Oil Corporation (IOC) has taken a hit of Rs 2,139 crore on its bottomline in the first quarter of the current fiscal and says it cannot “sustain its operations” unless the government takes some corrective measures on the oil front.
The government has been under pressure to raise prices of petrol and diesel and to somewhat moderate the increase by reworking its duty structure on petro-products.
IOC chairman M. S. Ramachandran built a strong case for a fuel price hike by saying that between April and June 15 this year, the oil major would end up losing over Rs 500 crore on the sale of petrol and diesel and Rs 1,639 crore on kerosene and LPG as the prices of these fuels had not been increased despite the soaring global crude prices.
He said that last year the government had asked ‘our upstream brothers’ — ONGC and OIL — and gas major Gail (India) Ltd to reimburse part of the loss made by IOC, Bharat Petroleum and Hindustan Petroleum on the sales of kerosene and LPG. This step is likely to be taken again as ONGC and OIL get international prices for their crude which have been soaring in recent months.
The government is contemplating the possibility of rationalising the customs duty and excise cuts on these petroleum products to ease the burden of the national oil companies without going in for a price hike.
Petroleum minister Mani Shankar Aiyar was scheduled to meet finance minister P. Chidambaram here today to discuss the thorny issue of an increase in the price of petroleum products. However, the meeting has now been scheduled for Wednesday as some final touches are still being given to the various options that the government is considering.
On the positive side, Ramachandran announced that IOC has clocked a net profit of Rs 7,005 crore for the financial year ended March 31, 2004, up 14.6 per cent from the corresponding figure of Rs 6,115 crore in the previous fiscal.
Ramachandran said the average refinery margin for the year had gone up to $5.3 per barrel compared with $4.13 per barrel in the previous year.
He said that switching to a cheaper crude mix during the year also helped cut costs as did the lower outgo for interests on loans. Various catalysts developed by the company had enabled its refineries to get the same yield of value-added products from larger quantities of cheap high sulphur crude that was substituted in the IOC basket.
The company had decreased its dependence on loans with its debt-equity ratio coming down from 0.77:1 in 2000-03 to 0.53:1 during 2003-04, which had reduced the outgo on interest payments. The appreciation of the rupee vis-à-vis the dollar had also resulted in lowering the debt burden of the company.
He also said IOC had reduced freight costs of importing crude by going in for very large crude carriers (VLCCs) instead of the smaller ships earlier.
Ramachandran said the company was going in for petrochemicals in a big way and would be forming a new petrochemicals division to manage the Rs 10,852 crore investment planned for this sector.
He said the sales of its lube brand, Servo, had gone up and it now accounted for a 42 per cent market share in the country. IOC was also increasing the number of its Xtramile branded outlets and would soon have 123 such outlets on the highways offering variety of services, he added.
The company planned to diversify into the upstream exploration and production businesses and was bidding for the development of an oilfield in Kuwait along with ONGC and BP as partners, the chairman said.