State refiners hit by oil slump, subsidy payout cushions fall
IOC was hit hardest and on Friday reported a net loss of Rs2,637 cr in the December quarter, against a loss of Rs961 cr a year earlier
New Delhi: Indian state refiners reported large losses on inventory for the third quarter, hit by the rapid decline in global oil prices, though some were helped by swift payment of government subsidies to compensate for its regulation of retail fuel prices.
Indian Oil Corp Ltd, the country’s largest refiner, was hit hardest and on Friday reported a net loss of Rs2,637 crore ($425 million) in the three months to 31 December, against a loss of Rs961 crore a year earlier.
Its loss on inventory, referring to the price impact in the time it takes to process crude and market the refined product, was Rs12,842 crore ($2.07 billion) compared with a gain of Rs653 crore a year earlier, chairman B. Ashok told reporters.
Brent crude dived to less than $60 a barrel in December from a peak above $115 last June.
However, the government’s swift payments to cover enforced low retail fuel prices offset losses on inventory for two junior refiners, officials said. Such payments are usually made months in arrears.
Despite the higher inventory hit and squeezed profit margins, Hindustan Petroleum Corp reported a narrower net loss of Rs325 crore, while Bharat Petroleum Corp managed to post a profit of Rs551 crore.
The three companies together lost Rs15,981 crore in the quarter because of the price cap on retail fuel sales, against Rs39,725 crore a year earlier, Reuters reported on Thursday.
The drop in those losses was because the government ended controls on pricing for diesel, which makes up about 40% of the country’s demand for refined fuel.
“We have managed to post profit because of timely release of subsidy, operational efficiencies and optimisation of cost despite high inventory losses," said B.K. Datta, head of refineries at BPCL.Reuters
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