CIO posts net loss of Rs 1,992-cr on petrol and diesel prices freeze in Q1
Indian Oil Corporation (IOC) reported a net loss of Rs 1,992 crore in the June quarter on Friday as the freeze in gasoline and diesel prices wiped out record refining margins.
The net loss of Rs 1,992.53 crore in April-June compares to Rs 5,941.37 crore of net profit during the same period a year ago, the company said in a stock filing.
Its operating income rose from 1.55 trillion rupees to 2.51 trillion rupees in April-June, mainly due to rising international oil prices.
During the quarter, IOC and other state-owned fuel retailers, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), did not revise gasoline and diesel prices in depending on rising costs.
India’s crude oil import basket averaged USD 109 per barrel, but retail pump tariffs were in line with around USD 85-86 per barrel cost.
This is the first quarterly loss in more than two years. The company had reported a net loss in January-March 2020, but that was due to inventory losses on the processing of more expensive crude.
These losses wiped out record refining margins. IOC earned $31.81 turning every barrel of crude oil into fuel at the refinery gate, compared to a gross refining margin (GRM) of $6.58 per barrel in April-June 2021.
Base margin, after offsetting inventory losses, was $25.34 per barrel.
“However, the removal of marketing margins for certain petroleum products offset the benefit of an increase in GRM,” the company said in notes to its accounts.
While the government has maintained that oil companies are free to revise retail prices, the three state-owned companies have not explained the reasons for the tariff freeze.
Typically, oil companies calculate an ex-refinery price based on import parity rates. But if the marketing division sells it at prices below import parity, losses are accrued.
IOC reported a pre-tax loss of Rs 1,052.78 crore on sales of petroleum products in April-June, compared to a profit of Rs 6,708.86 crore in the year-ago period. It made a pre-tax profit of Rs 8,251.29 crore in the previous quarter (January-March 2022).
Also, revenue from the petrochemical business fell to Rs 269.26 crore from Rs 1,737.82 crore in April-June 2021.
The loss was recorded despite a 22.5% increase in sales to almost 23 million tonnes and refineries converting 13% of crude oil into products.
State fuel retailers are expected to align their prices to an international cost each day. But they have periodically frozen prices ahead of crucial elections.
IOC, BPCL and HPCL stopped revising rates ahead of assembly elections in states like Uttar Pradesh. This 137-day freeze ended in late March with a price increase of Rs 10 per liter each before another round of freezes came into effect in early April.
This is despite international oil prices soaring to high levels for several years due to supply problems following Russia’s invasion of Ukraine.
In May, the government reduced excise duties on petrol and diesel which were passed on to consumers instead of being used to offset mounting losses on both fuel sales.
The current freeze on petrol and diesel prices, excluding reductions due to lower excise duties, is now 114 days old.
Earlier this month, ICICI Securities in a report said that IOC, BPCL and HPCL could post a combined loss of Rs 10,700 crore in the June quarter on the sale of gasoline and diesel at lower tariffs. at cost.
He had estimated that companies were losing 12 to 14 rupees per liter of petrol and diesel, completely offsetting the strong refining performance during the quarter.
Later, in a statement announcing the earnings, IOC Chairman SM Vaidya said, “IndianOil sold 24.648 million tonnes of product including exports in the first quarter of FY 2022-23.” .
“Our refining throughput for the first quarter of 2022-2023 is 18.936 million tonnes and the throughput of the Company’s national pipeline system, including natural gas pipelines, is 24.649 million tonnes over the same period,” said he declared.
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