Ramesh Sharma

Under-recovery effect: Mr Sarthak Behuria (left), Chairman, Indian Oil Corporation, and Mr S.V. Narasimhan, Director (Finance), at a press conference in the Capital on Wednesday. —

Our Bureau

New Delhi, July 30 Indian Oil Corporation Ltd’s (IOC) continued good performance in the physical business was not enough to better its financial performance, with the company reporting a 71 per cent decline in net profit for the first quarter of the current financial year.

Huge under-recoveries suffered due to sale of auto and cooking fuels below cost price (revenue loss of Rs 410 crore a day) was a dominant factor in bringing down the company’s net profit to Rs 415.13 crore (Rs 1,468.41 crore). However, net sales increased to Rs 74,872.60 crore (Rs 52,861.96 crore).

The Chairman of IOC, Mr Sarthak Behuria, told newspersons that “the under-recovery on account of non-realisation of market-related prices for petrol, diesel, kerosene, and domestic LPG for the quarter was Rs 7,320.57 crore (after considering special oil bonds of Rs 13,527 crore).”

Though IOC’s gross refining margin was substantially better at $16.81 a barrel ($10.70 a barrel), due to non-revision of retail selling prices of petroleum products in line with the international crude prices, it took a hit on its profitability.

Diesel consumption has seen a growth of 18-20 per cent. “Though there is a growth trend, it is a cause of concern because of mounting under-recoveries. We are seeing unprecedented growth mainly because diesel is priced lower than industrial fuels like fuel oil.”

The diesel consumption by transport and agri sector is around 70-75 per cent, while power sector uses 15-20 per cent. “If the demand continues like this then the industry will have to import 3-3.5 million tonnes.” The company can meet a demand growth of 14-15 per cent. IOC may import up to 1.2 mt of diesel this fiscal. “We imported 0.2 mt of diesel in the first quarter. We don’t need to import diesel before October.”IOC had been borrowing at the rate of about Rs 7,500 crore a month to meet shortfall in working capital.

Currently, the borrowings have touched Rs 42,500 crore, are likely to reach Rs 58,000 crore by September-end.

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