Indian Oil’s Q2 net drops 82% to Rs1,684 cr on forex, subsidy losses

State-owned Indian Oil Corporation (IOC) has reported an 82.5-per cent drop in net profit for the July-September quarter on foreign exchange losses and the government's failure to fully compensate it for losses on diesel and cooking fuel sales.

IOC's net profit for the July-September 2013-14 quarter plummeted to Rs1,683.92, from Rs9,611 crore in the same period a year ago.

"The decrease in profit is mainly on account of exchange loss of Rs2,158 crore in the quarter, as against the exchange gain of Rs2,289 crore in the corresponding quarter of the previous year," IOC chairman RS Butola said.

Also, the company had an uncompensated fuel subsidy bill of Rs413 crore on diesel and cooking gas sales.

Indian Oil Corp reported a Rs18,291 crore loss on selling diesel, cooking gas (LPG) and kerosene during the second quarter of the financial year ending 31 March 2014.

IOC received Rs8,634.14 crore from upstream firms like ONGC and another Rs9,243 crore in cash subsidy from the government, still leaving a revenue loss of Rs413 crore, Butola said.

IOC currently incurs a loss of Rs9.58 per litre of diesel, Rs35.77 per litre of kerosene and Rs482.50 per 14.2-kg LPG cylinder.

"At current prices, IOC will end the fiscal will an under-recovery (revenue loss) of Rs71,200 crore. Industry will have an under-recovery of Rs135,900 crore," he said.

IOC, however, managed to earn a profit because of the higher refining margin, Butola said.

IOC earned a refining margin of $7.43 on every barrel of crude oil in the July-September quarter as against a gross refining margin of $6.07 per barrel a year ago.

Turnover rose to Rs110,390 crore in July-September from Rs106,001 crore in the same period last financial year.

For the full financial year, Butola expects IOC to post a net loss of Rs1,409 crore on a turnover of Rs220,857 crore, against a net loss of Rs12,840 crore on sales of Rs202,862 crore during the corresponding period in the previous year.

IOC and other state-owned fuel retailers Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) sell diesel, domestic LPG and kerosene at government-regulated prices that are lower than their projected costs.

These losses are met through a combination of cash subsidy from the government and subsidised sale of crude by state-run upstream oil companies like ONGC and OIL.