Indian Oil Corporation (IOC), the nation’s largest oil company, on Friday reported widening of net loss to Rs. 2,636.80 crore in the October-December quarter after inventory losses arising from slumping oil prices eat into its margins.
The company had reported a net loss of Rs. 961.45 crore in October-December 2013.
“We had an inventory loss of Rs. 12,842 crore during quarter as compared to an inventory gain of Rs. 2,454 crore in the same period of last fiscal,” IOC Chairman B. Ashok said.
Inventory loss arose because IOC has inland refineries, where reaching imported crude oil takes time. IOC would typically buy crude oil at a certain price but by it will be not before 60 days that the same could be processed and fuel reaches market.
International oil prices would have tumbled during this time and the fuel as per the pricing policy will be valued at the current rate, resulting in inventory losses.
But for the inventory losses, IOC would have earned $10.47 on turning every barrel of crude oil into product in the third quarter but ended up recording a negative gross refining margin of $7.73 per barrel, he said. This margin compared to $4.56 per barrel GRM in the same period a year ago (without inventory gains GRM in third quarter of 2013-14 would have been $2).
The loss was despite all its fuel losses being compensated by the government. The government paid Rs. 2,866.09 crore in cash subsidy while upstream oil producers like ONGC extended an assistance of Rs. 6,115.74 crore to make up for all the losses that the firm had incurred on selling domestic LPG and PDS kerosene at rates lower than cost.
Sales dipped to Rs. 1,07,073.60 crore from Rs. 1,17,671.95 crore earlier.
Interest expense dipped to Rs. 929 crore in the third quarter as against Rs. 1,262 crore a year ago, he added.
