Apprehending that Indian Oil Corporation’s gross under recoveries could be as high as Rs 1,70,000 crore in the current financial year, the rating agency, ICRA, has assigned a ‘negative’ rating to the public sector refiner’s long term bonds programme.
“The negative outlook reflects ICRA’s concern over IOC’s key credit metrics in light of high crude oil prices, significant depreciation of the Indian rupee against the US dollar and faster than usual growth in the subsidized diesel demand,” the agency has said in a press release.
It has estimated that if the crude oil prices and the rupee-dollar exchange rate stays where they are today, and no price revisions happen for the subsidised fuels, then IOC’s gross under recoveries would be as high as Rs 1.7 lakh crore this year.
ICRA has recognised that the losses are borne partly by upstream oil companies and partly by the government itself. However, the delays in cash compensation by the government, lack of compensation for under recoveries in petrol, sharp volatility in crude prices and exchange rates, combined with “tepid refining margins” have taken a heavy toll on key credit metrics of IOC.
IOC reported a higher net loss of Rs 22,451 crore for the first quarter of the current year, compared with a net loss of Rs 3,719 crore in the same period last year. This was because of gross under recoveries of Rs 17,485 crore in the current first quarter, as against Rs 7,673 crore in Q1 of previous year.