State—owned Indian Oil Corporation (IOC) on Friday reported an 18% rise in second quarter net profit on the back of higher refining margin and inventory gains.
Net profit in July—September at ₹696.29 crore or ₹7.80 per share, was 18.4% higher than ₹3,121.89 crore or ₹6.59 a share, in the year—ago period, IOC chairman Sanjiv Singh told reporters here.
“Our sales increased and we recorded robust refining margins in the second quarter,” he said.
IOC earned $7.98 on turning every barrel of crude oil into fuel in the quarter compared to $4.32 per barrel gross refining margin (GRM) in the same period last fiscal.
The company also had an inventory gain of ₹1,056 crore in July—September as against a loss of ₹686 crore in the previous fiscal, he said.
Inventory gain kicks in when a company buys crude oil at a particular rate, but by the time it is able to process and turn it into fuel, the rates have gone up, resulting in higher value for the product. Reverse of this results in inventory loss.
Mr. Singh said that since petrol, diesel and jet fuel (ATF or aviation turbine fuel) have been kept out of the Goods and Services Tax (GST) regime, the company had a ₹300 crore hit on pre—tax profits. Under GST, tax paid on inputs can be set off against tax due on final product. Since the three fuels along with crude oil and natural gas are out of GST, any tax they pay on input goods and services cannot be recovered or set off against final tax on products, resulting in a loss.
