High oil prices, interest rates begin to hurt
Indian Oil Corporation on Wednesday said it has posted a net loss in the January-March period, the first in nine quarters, because of a sharp rise in global crude prices and the government's inability to bring commensurate increase in retail fuel prices.
The country's largest oil retailer said it incurred a net loss of Rs 414 crore in the fiscal fourth quarter compared with a net profit of Rs 1,502 crore in the same period a year ago. Quarterly sales rose 27 per cent from a year ago, but expenses grew faster because of rising cost of crude. The last time IOC, a highly profitable Fortune 500 company, reported a loss was in the quarter ended December 31, 2005. It incurred a loss of Rs 6.5 crore in that period. “This is primarily a result of the rising under realisations,” Behuria said. Net under recoveries for Indian Oil stood at Rs 9,774 crore for fiscal year 2007-08, up from Rs 2,190 crore in the previous year.
Although global crude prices have more than doubled in the past year, the government has allowed only a moderate increase in retail prices of petrol and diesel. That, in turn, has resulted in huge spike in oil subsidies, a substantial part of which has fallen on the books of the oil companies. So much so that oil companies are now running out of cash to import crude.
Behuria said IOC will run out money to buy crude by September if the government doesn't increase fuel prices. Hindustan Petroleum and Bharat Petroleum Corp -- which have yet to announce their results -- could face a similar crunch as early as July.
As a result, IOC has decided to ration its sales and encourage sale of premium branded petrol and diesel, whose prices are not controlled by the government, Behuria said. Besides, the company has temporarily put on hold new investments, he said.
IOC stock prices rose 0.9 per cent to Rs 425 in Wednesday's trading with the market having already discounted for the poor showing. Since January 1, 2008, Indian Oil stock has lost 82.6 per cent.