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Indian Oil Corporation Ltd (IOC) on Wednesday said its capacity utilization has fallen to 84% currently from 100% last November as the deadly second wave of the pandemic has forced most states to impose strict lockdowns.

This has crimped fuel demand in India, which is the world’s third-largest oil importer and the fourth-largest buyer of liquefied natural gas. Energy consumption, especially electricity and refinery products, tends to be linked to overall demand in the economy.

Capacity utilization at IOC, the country’s largest refiner, had dropped to about 35% at the start of the lockdown during the first wave of the pandemic last year amid a sharp drop in demand for fuel products.

India had imposed the world’s largest and strictest lockdown last year to contain the virus that originated in Wuhan, China.

Meanwhile, IOC announced a net profit of 8,781.30 crore for the March quarter, compared with a net loss of 5,185.32 crore a year earlier. This was largely due to inventory gain and increased petrochemical margins.

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Following the covid outbreak, the cost of the Indian basket of crude had plunged to $19.90 in April last year during the first wave of the pandemic before recovering to $63.40 a barrel in April this year, showed data from the Petroleum Planning and Analysis Cell.

India’s largest fuel retailer posted a huge jump in annual net profit to 21,836 crore for the financial year ended 31 March, from 1,313 crore in 2019-20 due to higher inventory gains and improved petrochemical margins. Annual revenue, however, declined 9.08% to 5.14 trillion during 2020-21 from 5.66 trillion in the previous year.

The cost of the Indian basket of crude, which comprises Oman, Dubai and Brent crude, was at $68.69 a barrel on Tuesday.

Brent crude had dropped to a 21-year low while US oil futures slumped to negative for the first time in April last year as the glut induced by global lockdowns overwhelmed the world’s limited storage facilities, triggering massive selling by traders.

Addressing a news conference, IOC chairman S.M. Vaidya said, “IndianOil sold 81.027 million tonnes of products, including exports, during the year April 2020 to March 2021. Our refining throughput for FY2020-21 was 62.351 million tonnes and the throughput of the corporation’s countrywide pipelines network was 76.019 million tonnes during the year."

The state-run company also posted higher refining margins. The gross refining margin—the difference between the cost of processing crude and the revenue earned from the sale of finished products—improved sharply to $5.64 per barrel during FY2020-21 from $ 0.08 per barrel in the previous year.

This comes at a time when fuel refiners have started to increase the price of transportation fuels after a brief pause since the results for the assembly elections in West Bengal, Assam, Kerala, Tamil Nadu and Puducherry were declared on 2 May.

State-run oil marketing companies have been raising petrol and diesel prices since last year in line with an increase in global crude oil prices.

Vaidya said IOC is targeting a capital spending of 28,847 crore in the current fiscal (2021-22) as against an expenditure of 27,194 crore in the previous year.

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