Indian Oil Result: IOC Declares Net Loss Of Rs. 1,992 Crore Due To Petrol And Diesel Price Freeze

In April to June, Indian Oil’s operational revenue increased to Rs 2.51 lakh crore from Rs 1.55 lakh crore, primarily due to higher international oil prices.

The June quarter’s net loss for Indian Oil Corporation (IOC) was Rs 1,992 crore due to record-low refining margins being destroyed by the price freeze on gasoline and diesel.

The business reported a net loss of Rs 1,992.53 crore for the months of April through June, compared to a net profit of Rs 5,941.37 crore for the same period last year, in a stock exchange filing. In April through June, its operating revenue increased to Rs 2.51 lakh crore from Rs 1.55 lakh crore, primarily as a result of higher international oil prices.

IOC did not raise the price of gasoline and diesel during the quarter, and neither did other state-owned fuel wholesalers Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).

The average price of the crude oil India imports is $109 per barrel, but the cost at the retail pump is closer to $85-86 per barrel.

This quarter’s deficit marks the first in more than two years. In January to March 2020, the company recorded a net loss, however the loss was due to inventory losses from processing more expensive oil.

These losses offset the refining margin records. In comparison to a gross refining margin (GRM) of $6.58 per barrel in April–June 2021, IOC made $31.81 on every barrel of crude oil converted into fuel at the refinery gate.

After compensating for inventory losses, the core margin per barrel was $25.34. However, the corporation noted in notes to its accounts that “the depressed marketing margins of certain petroleum products have outweighed the benefit of a rise in GRM.”

The three state-owned corporations have not given an explanation for why they have frozen the rates, despite the government’s insistence that oil companies are free to change retail pricing.

Typically, oil companies use import parity rates to determine a refinery gate price. However, losses are recorded if the marketing department sells it for less than import parity.

In comparison to a profit of Rs 6,708.86 crore in the same period last year, IOC reported a pre-tax loss of Rs 1,052.78 crore on sales of petroleum products. Pre-tax earnings for the previous quarter (January-March 2022) were Rs 8,251.29 crore. Additionally, profits from the petrochemicals sector decreased from Rs 1,737.82 crore in April–June 2021 to Rs 269.26 crore.

The loss occurred despite a 22.5% increase in sales to roughly 23 million tonnes and refineries turning crude oil into products at a rate that was 13% higher.

State-run fuel sellers must daily synchronise prices with an international cost. However, they have occasionally frozen pricing prior to important elections.

In advance of the assembly elections in states like Uttar Pradesh, IOC, BPCL, and HPCL ceased adjusting tariffs. After a 137-day price freeze, prices were increased by Rs 10 per litre in late March before another round of freezing took effect in early April.

This is true even though supply concerns as a result of Russia’s invasion of Ukraine drove up global oil prices to multi-year highs.

In May, the government reduced the excise charge on gasoline and diesel, which was passed through to customers rather than utilised to offset growing losses on the sale of the two fuels.

Except for the decrease brought on by a drop in excise duty, the present price freeze on gasoline and diesel has been in effect for 114 days.

IOC, BPCL, and HPCL may have suffered a collective loss of Rs 10,700 crore in the June quarter as a result of selling gasoline and diesel below cost, according to a research published earlier this month by ICICI Securities.

The high refining performance during the quarter was totally offset by the businesses’ expected losses of Rs 12–14 per litre on gasoline and diesel.

Later, in a statement announcing the earnings, IOC Chairman S M Vaidya said, “IndianOil sold 24.648 million tonnes of products, including exports, during the first quarter of the financial year 2022-23”.

“Our refining throughput for Q1 2022-23 is 18.936 million tonnes and the throughput of the Corporation’s countrywide pipelines network, including gas pipelines, is 24.649 million tonnes during the same period,” he said.