Indian Oil Corp, the nation’s largest oil firm, on Thursday reported a 35% drop in fourth-quarter net profit as refining margins shrank and the government did not fully compensate it for losses on fuel sales.
Net profit declined to R9,389.85 crore in the January-March quarter from R14,512.81 crore in the same period a year ago, the company said. IOC, which owns eight refineries, earned $2.17 on every barrel of crude oil turned into fuel as against a gross refining margin (GRM) of $3.33 per barrel in Q4 of 2012-13.
The company had got a lump sum cash subsidy for more than one quarter in January-March of 2013.
Retailers such as IOC sell diesel and cooking fuels LPG and kerosene at government-controlled rates, which are below cost. The difference, called under-recoveries, is made good through a combination of cash subsidy and assistance from upstream oil and gas producers, including Oil & Natural Gas Corp. While the upstream firms make quarterly payments, the government subsidy is not that regular and is often clubbed for more than one quarter.
IOC said it got R37,182.77 crore from the government as cash subsidy and R34,673.59 crore from upstream firms, which were not sufficient to cover R72,938.45 crore of losses on fuel sales. It absorbed losses of R1,082.59 crore.
The company, which posted losses in two of the previous three quarters after not getting timely subsidy, reported an annual net profit of R7,019.09 crore for 2013-14, up from R5,005.17 crore in 2012-13.