State-run oil refiners are likely to report profits on daily sale of petrol, diesel, cooking gas and kerosene in the fortnight ending December 31, after average crude oil prices have been nearly 3 per cent lower and the rupee has appreciated 3.2 per cent compared with the first fortnight of this month.
This profit is, however, not likely to result in overall profits in the third quarter ending December 31, 2008, for Indian Oil, Bharat Petroleum, and Hindustan Petroleum, as margins from their refineries are lower and, volatile crude oil prices have resulted in high inventory losses.
The three companies are likely to see their profits on petrol and diesel rise and their losses on cooking gas and kerosene fall this fortnight, which will result in the companies making profits on their fuel sales on a net basis.
Indian Oil, which supplies over half the fuels the country consumes, reported daily losses of Rs 6 crore in the first fortnight of December, down from Rs 25 crore after fuel prices were cut on December 5. The company was making a profit of Rs 11.48 on every litre of petrol and Rs 2.92 on every litre of diesel, it sold in the first fortnight of this month. It was making a loss of Rs 17.26 on every litre of kerosene and Rs 148 on every cylinder of cooking gas.
The three companies were together losing around Rs 10 crore on fuel sales in the first fortnight of December.
“On a net basis, we could make daily profits as gains from petrol and diesel sales are expected to be higher than losses from kerosene and diesel,” said a senior IndianOil official. “But, we still have to deal with the accumulated losses for the earlier part of this year.”
As crude oil prices rose 25 per cent between April and July this financial year, and the rupee depreciated 6.29 per cent against the US dollar, the under-realisations of the oil companies rose to around Rs 245,000 crore from around Rs 100,000 crore for the full financial year. Prices have since tumbled by over 70 per cent, bringing down the projected under-realisations of these three companies to Rs 110,000 crore for this financial year.
“Oil prices have fallen, but the rupee has continued to depreciate. That has negated much of the impact of lower oil prices,” said a Mumbai-based analyst.
The rupee has depreciated 15.62 per cent between August and December 24. Fall of $1 on on every barrel of crude oil prices decreases annual under-realisations of the oil companies by around Rs 3,000 crore while every Re 1 depreciation of the Indian currency against the US dollar increases annual under-realisations by around Rs 7,000 crore.
IndianOil, Bharat Petroleum and Hindustan Petroleum are, however, likely to continue making losses on kerosene and cooking gas sales despite the fall in oil prices. “Nowhere in the world is kerosene sold at Rs 9 a litre. For us to start making profits on that, oil prices have to fall drastically,” said another IOC official. The oil companies, however, are expected to post losses in the third quarter ending December 31, 2008, as a result of high inventory losses and interest payouts arising from loans they had to take to meet their working capital needs.
Total borrowings at the end of November 2008 stood at Rs 115,000 crore which would result in interest payout of Rs 8,100 crore during the year, Minister of State for Oil & Gas Dinsha Patel told Parliament on Tuesday.
