Indian Oil Q4 Profit Drops 35 Per Cent as Refining Margins Shrink

Indian Oil Corp (IOC), the country's largest oil firm, on Thursday reported a 35 per cent drop in net profit at Rs 9,389.85 crore for the fourth quarter that ended on March 31, 2014, as refining margins shrank and government did not fully compensate it for losses on fuel sales.

 

The oil retailer had posted a net profit of Rs 14,512.81 crore for the corresponding quarter a year ago, it said in a statement in Delhi.

 

IOC, which owns eight refineries, earned $2.17 on every barrel of crude oil turned into fuel as against a gross refining margin (GRM) of $3.33 per barrel in the fourth quarter of fiscal year 2012-13.

 

The company had received a lump sum cash subsidy for more than one quarter in the January-March period of 2013.

 

Retailers such as IOC sell diesel and cooking fuels LPG and kerosene at government-controlled rates, which are below cost. The difference, called under-recoveries, is made good through a combination of cash subsidy and assistance from upstream oil and gas producers, including Oil & Natural Gas Corp (ONGC). 

 

While the upstream firms make quarterly payments, the government subsidy is not that regular and is often clubbed for more than one quarter.

 

IOC said it got Rs 37,182.77 crore from the government as cash subsidy and Rs 34,673.59 crore from upstream firms, which was not sufficient to cover Rs 72,938.45 crore of losses on fuel sales. It absorbed losses of Rs 1,082.59 crore.

 

The company, which posted losses in two of the previous three quarters after not getting timely subsidy, reported an annual net profit of Rs 7,019.09 crore for 2013-14, up from Rs 5,005.17 crore in 2012-13.

 

It suffered a foreign exchange loss of Rs 3,190.92 crore in the previous financial year.

 

IOC's gross refining margin was $4.24 per barrel in 2013-14, up from $3.16 in the previous year.

 

Sales increased to a record Rs 4,73,210.09 crore, making IOC the largest company in India by turnover. In 2012-13, the company had a turnover of Rs 4,47,096.25 crore.