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Photo: Reuters
Photo: Reuters

Domestic sales offsetting RIL export slump

Export earnings decline 9.4% to Rs33,282 crore during the June quarter from Rs36,717 crore a year earlier

Reliance Industries Ltd (RIL) exported less than 10 million tonnes of petroleum products in the April-June period—a first in three quarters—as domestic retail and bulk sales of petroleum products increased.

“Higher retail and public sector unit sales resulted in lower exports quarter on quarter," RIL said in a presentation to analysts on Friday after its June quarter results.

RIL, India’s largest petroleum exporter, exported 9.8 million tonnes (mt) of petroleum products in the April-June quarter against 8.5 mt in the corresponding period last fiscal year. The company’s export earnings declined 9.4% to 33,282 crore during the quarter from 36,717 crore in corresponding period of the previous year.

Exports of refined products were worth 28,610 crore during the first quarter of 2016-17 fiscal against 32,352 crore in the previous year’s quarter.

RIL on Friday posted a higher-than-expected group profit in the three months ended June, helped by stronger margins in its core refining and petrochemicals business.

Consolidated net profit rose 18% in the first quarter to 7,113 crore from 6,024 crore a year ago. Revenue at the group level fell 13.1% to 71,451 crore from 82,509 crore a year earlier.

The gross refining margin, or GRM, the difference between the per-barrel price of crude and the value of petroleum products distilled from it, strengthened to $11.5 from $10.4 a year ago.

Analysts had expected a GRM of $9.5-10 per barrel.

“India’s consumption of petro products is growing and RIL is taking advantage of that trying to expand in the domestic market in both retail as well as the bulk segment as exports have slowed. The company has also included its petro-retailing segment in its overall retail operations. This would show an improved performance in the overall retail segment," said an analyst with a domestic brokerage on the condition of anonymity.

Srikanth Venkatachari, joint chief financial officer at RIL, had on 15 July said the company’s fuel retail outlets which are company-owned and -operated are also included in the retail business now. One-third of RIL’s total 1,400 fuel-retailing outlets are owned and operated by the firm.

The company said it has registered an increase of 21% in volume of its petrol and diesel sales during the quarter.

During the April-June quarter, demand for petrol in the domestic market rose 10%, diesel 4.7% and jet fuel 11%. Exports constituted the bulk of RIL’s petroleum sales at 59% of total volume.

Domestic sales from its own retail outlets and to bulk customers and public sector companies were 4.1 million tonnes while captive consumption was 2.7 million tonnes.

In its bulk business, RIL said its liquified petroleum gas (LPG) sales grew by 10% from a year earlier to 21.4 kilotonnes. The company has tested and developed 4 kg LPG cylinder which it plans to start selling next month. Media reports say RIL has written to the oil ministry expressing interest in distributing subsidized cooking gas to households.

In sales of bulk diesel, the company said it has more than 3.8% market share post deregulation in 2014 and has entered into mining for fuel supply. The company received extension of contracts to supply diesel to the Indian Railways and state transport units (Pune).

“Every 10th Indian locomotive is fuelled by RIL. Expanding presence across the country," said RIL’s presentation.

The refiner has also enhanced its supply infrastructure to service retail, bulk and oil marketing companies such as Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd. RIL now owns five terminals, nine hired terminals and 19 depots as part of its supply infrastructure.

In the aviation turbine fuel business, RIL saw sales volume grow 38% from a year earlier.

“RIL has leading market share at 10 out of 25 airports where it operates," the company said in its presentation to analysts.

On the retail front, RIL has re-opened its 1,022 retail outlets of its 1,400 retail outlets that it shut down in 2008 as it was unable to compete with the subsidized fuel prices that the state-owned oil firms were offering.

“RIL said they want to re-open all of their fuel retailing outlets in the next two quarters though retail outlet throughput is a meagre 230 kilo-litres per month as compared to oil marketing companies," said an analyst with a domestic brokerage on the condition of anonymity.

RIL and Essar Oil have cornered nearly 5% of the fuel retail market while 95% rests with the three state oil marketing companies, namely Indian Oil, Bharat Petroleum and Hindustan Petroleum.

The increase in market share has come about post deregulation of petrol prices in June 2010 and diesel prices in October 2014. The deregulation in fuel prices has phased out subsidies making the fuel market attractive for RIL and Essar Oil which could, as a result of the change, sell petrol and diesel at the same rate as that of oil marketing companies.

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