State-owned Indian Oil Corp (IOC) today reported 34 per cent rise in its third-quarter (Q3) net profit on back of higher refinery margins and government cash dole offsetting losses on fuel sales.
IOC, the country's largest fuel retailer by sales, said that its net profit for the October-December quarter climbed to Rs 3,331.96 crore, from Rs 2,488.44 crore from the year-ago period.
The firm earned USD 6.15 on turning every barrel of crude oil into fuel in the quarter as compared to USD 5.15 a barrel gross refining margin in the year ago period, IOC Chairman R S Butola told reporters here.
IOC has seen a turnaround in refinery margins this fiscal when it began with a negative USD 4.81 per barrel margin in fist quarter.
Butola said company's borrowings have risen by about Rs 20,000 crore in first nine months to current fiscal to Rs 94,908 crore.
"In nine months (April-December), our interest cost was Rs 5,005 crore. This compares to Rs 5,600 crore interest payout in the full 2011-12 fiscal. In 2010-11, our interest cost was only Rs 3,600 crore. Interest is a big burden today and is increasing every day as the company borrows to meet the deficit on fuel sales," he said.
IOC and other retailers well diesel, domestic LPG and kerosene at a rate much lower than their cost of production.
The government meets less than half of the losses and that too not on a regular basis, forcing the companies to resort to borrowings to meet even working capital requirement. The company is losing Rs 9.22 a litre on diesel, Rs 31.61 a litre on kerosene and Rs 481 per 14.2-kg domestic LPG cylinder.
IOC, he said, had a revenue loss of Rs 67,123 crore in the first nine months of the current fiscal. Of this, the government has so far sanctioned Rs 29,568.53 crore as cash subsidy.
Upstream firms like ONGC have chipped in another Rs 24,327.29 crore, leaving an unmet gap of Rs 13,226.84 crore.
"If we had received full compensation for the under-recoveries (revenue loss on fuel sales), our profit should have been higher by Rs 3,700 crore," he said.
Besides, the company had till now lost Rs 676 crore on petrol sale for not revising prices in line with cost. State retailers are not compensated for losses on petrol as the government had decontrolled pricing of the fuel in June 2010.
Though the companies had freedom to revise rates in line with