Indian Oil Corporation (IOC), the nation’s largest oil firm, on Tuesday reported a 81 per cent drop in June quarter net profit, as refinery and marketing margins fell and the firm booked under-recovery on the sale of domestic cooking gas LPG at government-controlled rates.
IOC reported standalone net profit of Rs 2,643.18 crore in the April-June period — the first quarter of the current 2024-25 fiscal year — compared to a profit of Rs 13,750.44 crore a year back, the company said in a stock exchange filing.
Net profit also declined sequentially, when compared to an earning of Rs 11,570.82 crore in the January-March quarter.
While the firm earned USD 6.39 on turning every barrel of crude oil into fuel in the quarter (USD 8.34 per barrel gross refining margin last year), its pre-tax earnings from downstream fuel retailing businesses slumped 77 per cent to Rs 4,299.96 crore.
The company and other state-owned fuel retailers — Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) — last year made extraordinary gains from holding petrol and diesel prices despite a drop in cost.
The price freeze was justified in the name of recovering losses the three retailers had suffered in the previous year when they did not raise retail prices despite a surge in cost.
The gains arising from the price freeze were eroded with petrol and diesel prices being cut by Rs 2 per litre each just before general elections were announced. This together with a drop in product cracks or margins on relatively stable crude oil prices led to fall in profits.
Prior to IOC, BPCL and HPCL too have reported a drop in their first quarter earnings.
Also, IOC had an un-compensated LPG subsidy of Rs 5,156.23 crore in the quarter, the filing showed.
As per an order of the oil ministry, when market determined price (MDP) of LPG cylinders is less than its effective cost to customer (ECC), the oil marketing companies (OMCs) have to retain the difference in a separate buffer account for future adjustment.
“However, as on June 30, 2024, the company had a cumulative net negative buffer of Rs 5,156.53 crore, as the retail selling price was less than MDP,” IOC said.
This is to be made good by the government by way of a subsidy.
Revenue from operations was almost flat at Rs 2.15 lakh crore.
IOC refineries turned 18.16 million tonnes of crude oil into fuel in the quarter as compared to 18.75 million tonnes in April-June 2023.
Fuel sales were up 3 per cent at 24.06 million tonnes (excluding exports).
IOC further said the board in a meeting on Tuesday accorded Stage-1 approval for construction of a greenfield terminal at Bihta, near Patna, in Bihar on Barauni-Kanpur product Pipeline (BKPL) and Patna-Motihari-Baitalpur Pipeline (PMBPL) at an estimated cost of Rs 1,698.67 crore.
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