India’s top oil firm IOC on Friday reported a net profit of Rs 13,750 crore in three months to June 30 – the highest in a decade – as margins on petrol and diesel turned positive on softer oil prices.
Standalone net profit of Rs 13,750.44 crore, or Rs 9.98 per share, in April-June (the first quarter of current fiscal year 2023-24) compared with a loss of Rs 1,992.53 crore in the same period a year back, according to a company’s stock exchange filing.
The profit was almost 37 per cent higher than Rs 10,058.69 crore net profit in the preceding quarter and more than half of the company’s best-ever annual earning of Rs 24,184.10 crore recorded in 2021-22 (April 2021 to March 2022).
IOC posted a net profit of Rs 14,513 crore in January-March 2013 after it received fuel subsidy for more than one quarter during those three months.
Last year, IOC and other government-owned fuel retailers – Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) – froze retail petrol and diesel prices to cushion domestic consumers from rising international oil rates.
That freeze led to the three retailers suffering heavy losses in not just April-June 2022 but also in the subsequent quarter.
Margins on petrol and diesel turned positive following softening of international oil prices in the June quarter, but rates were not revised, and the companies recouped losses they incurred last year.
BPCL earlier this week reported a net profit of Rs 10,644 crore in the June quarter. HPCL is due to announce its first-quarter earnings next week.
The fall in oil prices meant that revenue from operations for IOC fell 2.36 per cent to Rs 2.21 lakh crore.
Operational performance during the quarter improved as earnings before interest, taxes, depreciation and amortization (EBITDA) increased 44.5 per cent to Rs 22,163 crore from Rs 15,340 crore, sequentially.
The company earned USD 8.34 on turning every barrel of crude oil into fuel during the quarter ended June 30 against a gross refining margin (GRM) of USD 31.81 per barrel in the same period last year, the filing said.
Core GRM or the current price GRM for the period April-June 2023 after offsetting inventory loss/gain came to USD 9.05 per barrel.
IOC said fuel sales rose to 21.8 million tonnes in the first quarter from 21.2 million tonnes a year back. Its refineries processed 18.26 million tonnes of crude oil, up from 17.59 million tonnes in April-June 2022.
IOC, BPCL and HPCL temporarily abandoned the daily price revision last year and have not revised petrol and diesel prices in line with the cost. And the losses they incurred when the oil prices were higher than the retail selling prices are recouped with rates dropped.
The three firms have been making positive margins on petrol since the fourth quarter of the 2022 calendar year but diesel, which accounts for the bulk of the fuel sales, had been in the red.
But in May, margins on diesel turned positive with a small 50 paise a litre profit.
International oil prices had spiked to USD 139 per barrel in March 2022 in the aftermath of the Russia-Ukraine war. They cooled to USD 75 during May-June.
At peak, oil firms lost Rs 17.4 per litre on petrol and Rs 27.7 a litre on diesel. In the October-December quarter, oil firms earned Rs 10 a litre margin on petrol but lost Rs 6.5 on diesel. In the following quarter, the margins on petrol moderated to Rs 6.8 a litre while diesel earned Rs 0.5 per litre.
Oil prices have firmed up this month, and the basket of crude oil that India buys has averaged USD 80 per barrel so far, making a reduction in rates difficult.
Holding prices when input cost was higher than retail selling prices led to the three firms posting net earnings loss. They posted a combined net loss of Rs 21,201.18 crore during April-September despite accounting for Rs 22,000 crore announced but not paid LPG subsidy.
International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 — climbing to a 14-year high of nearly USD 140 per barrel in March 2022 after Russia invaded Ukraine before sliding on weaker demand from top importer China and worries of an economic contraction.
But, for a nation that is 85 per cent dependent on imports, the spike meant adding to already firming inflation and derailing the economic recovery from the pandemic.
So, the three fuel retailers, who control roughly 90 per cent of the market, froze petrol and diesel prices for the longest duration in at least two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices.
The freeze continued into 2022 but the war-led spike in international oil prices prompted a Rs 10 a litre hike in petrol and diesel prices from mid-March before another round of excise duty cut rolled back all of the Rs 13 a litre and Rs 16 per litre increase in taxes on petrol and diesel affected during the pandemic.
That followed the current price freeze that began on April 6, which still continues.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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