Selling auto and cooking fuel at a Government controlled price has led to Indian Oil Corporation Ltd reporting a 30 per cent drop in its net profit for the fourth quarter of FY 2011.
IOC's net profit stood at Rs 3,905.16 crore down from Rs 5,556.77 crore in the same quarter of the previous fiscal. This comes even as net sales grew 31 per cent (after deducting Government subsidies) to Rs 87,321 crore during the quarter.
For the fiscal 2010-11, the net profit dropped 27 per cent to Rs 7,445 crore, while the net sales went up 21 per cent to Rs 3.04 lakh crore.
Mr R.S. Butola, Chiarman, IOC, told newspersons that had it not been for the revenue loss on selling fuel at a controlled price, the profit for FY 11 would have been higher by Rs 3,200 crore. IOC is incurring a revenue loss of Rs 261 crore daily on selling fuel (excluding petrol) at controlled price.
If the Government does not provide further compensation on subsidised fuel sales, the company will need to borrow between Rs 5,000-6,000 crore every month, Mr Butola said. IOC's current borrowings stand at Rs 67,880 crore.
For the fiscal 2010-11, IOC had to absorb a loss of Rs 4,845 crore on fuel sales after accounting for cash subsidy from the Government and assistance from upstream companies. In FY 11 the net under-recovery on diesel, domestic LPG, and kerosene stood at Rs 3,803 crore. It also incurred an under-recovery of about Rs 1,042 crore on petrol. Effective June 1, the under recovery on petrol is expected to be Rs 1.15 a litre.
IOC had to incur Rs 1,500 crore in interest on borrowings it had to resort to because Government did not release cash subsidy in time. Higher depreciation was also a factor for the dip in profits, he said.
The company earned $7.82 on every barrel of crude oil processed in fourth quarter for FY 11 against a gross refining margin of $3.38/barrel in the previous year.
The company's board of directors has also recommended dividend of Rs 9.50 per share. Mr Sudhakar Rao, has been appointed as Independent Director on the board with effect from May 30, 2011.
Indian Oil shares at the BSE dipped 0.25 per cent to Rs 319.75 on Monday.