IOC banks on bonds to offset subsidy burden

Special Correspondent

BANGALORE: Indian Oil Corporation (IOC) has said that the outlook on pure operations for the fiscal looked bleak with refinery margins coming under pressure, forcing the company to bank heavily on the bonds to be issued by the Government to oil marketing companies to offset the huge subsidy burden arising out of selling kerosene and LPG at below cost.

"The outlook on pure operations is not very promising for the fiscal. In fact, the third quarter (October-December) is not going to be a very good quarter. The profitability of the company for the fiscal will only improve when the bond comes. The entire thing will depend on the bonds... when the approval will come," Sarthak Behuria, Chairman, IOC, told reporters here on Thursday.

Mr. Behuria said IOC's net profit was down two-thirds at Rs. 895 crore during the first six months of the current fiscal as compared to Rs. 2,712 crore a year ago.

The company had also borrowed heavily from the market during the current fiscal.

If Parliament passes the bond issue during the winter session and the Petroleum Ministry finalises a scheme for the issue, the company would book the bonds straightway by selling it to banks and financial institutions. IOC was expected to get a share of Rs. 5,500-6,000 crore worth of bonds out of the total Rs. 11,000 crore bonds to be issued by the government to public sector oil companies for under recoveries, he said. IOC's under recoveries for selling kerosene and LPG below cost stood at Rs. 10,000 crore till December without sharing. The under recoveries from kerosene was Rs. 10 a litre while that on LPG was Rs. 200 a cylinder, Mr. Behuria said.

IOC would also sell the cross-holdings of other oil PSUs in the market estimated at Rs. 14,000 crore.