Indian Oil Corporation Limited : Official statement of the CMDs of IOCL, HPCL and BPCL
06/03/2012| 07:27pm US/Eastern
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It is noted that a false impression is being created in some
sections that the Oil Marketing Companies (OMCs) have
recorded huge profits in 2011-12. On the contrary, the OMCs
have been incurring huge losses. The companies incurred
losses due to sale of three products, namely Diesel,
Domestic LPG and PDS Kerosene at highly subsidized prices. It
is only after the assistance of Rs. 83,500 crore from the
Government and Rs. 55,000 crore from the upstream oil
companies ( ONGC, OIL and GAIL), totaling Rs.1,38,500
crore, the three Public Sector OMCs could declare nominal
profits. Had this assistance not been given, the three OMCs
would have reported a combined loss of Rs. 1,32,000
crore.
It is worthwhile to mention that the three OMCs together had
a combined turnover of Rs. 8,33,000 crore during 2011-12.
Against this, they had declared a combined profit of mere Rs.
6177 core, which is only 0.7% of their turnover. This level
of profit is not adequate for OMCs to enable them to
incur huge expenditure on continuous modernization, making
available environmentally compliant fuels, laying of
pipelines, enhancing storage, and development of other
infrastructure . It is important to note that the OMCs are
enabled to announce at least nominal profits for maintaining
their blue chip status and credit ratings at the global
level.
Because of the highly subsidized sale of Diesel,
Domestic LPG and PDS Kerosene, the OMCs are under huge
financial strain. Their combined borrowings have gone up from
Rs.97,000 crore in March 2011 to a whopping amount of
Rs.1,28,000 crore in March 2012 . Similarly, their interest
burden has gone up from Rs. 4,700 crore in 2010-11 to Rs.
9,500 crore in 2011-12. If the government and upstream
assistance was not made available to the OMCs, to make good
their losses, they would not have been in a position to raise
necessary finance to purchase crude from the international
market and maintain uninterrupted supply of petroleum
products in the country.
Although petrol has been a deregulated product since
26.6.2010, the OMCs have incurred losses of Rs. 2,300 crore
in 2010-11 and Rs. 4,900 crore in 2011-12 and Rs. 2,300 crore
in the current financial year (till 23rd May, 2012). Because
of the inability of the OMCs to increase the price of petrol
for long time, the situation became such that the correction
in the price of petrol was absolutely unavoidable.
It may be noted that the average price of crude oil was
only USD 85/bbl in 2010-11 which went up to USD 112/bbl
in 2011-12, an increase of 32%. It is pertinent to mention
that the cost of crude oil and products imported / bought
from other companies constitutes about 91-93% of the total
cost incurred by the OMCs. Therefore, the propaganda that the
OMCs are incurring high administrative expenses is
unfounded.
Apart from the above, the value of rupee has depreciated from
Rs. 46 per USD in Sept 2011 to Rs 54.5 per USD in May 2012.
The double disadvantage of increase in oil prices and
sharp rupee depreciation have affected the oil sector in
India on an unprecedented scale. Both the consumers and
commentators are requested to understand the special
difficulty the country is facing at present.
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