PSU refiners face net loss of Rs 12k cr in H1

FOR the first-time ever, navratna refining majors — IndianOil (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) — are set to slip into the red in the second quarter. It is estimated that the combined losses of the three oil companies in the first half of 2008-09 are likely to hover around Rs 12,000 crore. The losses incurred by the oil companies come despite a hefty subsidy dole out from upstream major ONGC and oil bonds worth over Rs 20,000 crore being issued by the government.
    "For the first time all the three public sector oil marketing companies (OMCs) would slip into the red in the first half of the current financial year due to huge subsidy burdens on account of major petroleum products (petrol, diesel, PDS kerosene and cooking gas). This is despite factoring in oil bonds for the period," an official told ET.
    BPCL, which declared its result on Thursday, posted a net loss of Rs 2,625 crore in the second quarter of 2008-09. Its loss for the first half year was Rs 3,692 crore compared to Rs 1,231 crore net profit in the corresponding period of the previous year. IOC and HPCL will announce their results for the second quarter on Friday.
    According to a senior IOC official, the estimates drawn up in June failed to hold good as the oil companies were left to absorb higher losses on their books. Falling Re, rising interest rates add to OMCs' woes
    "THE inventory gain, which was estimated at that time given the high oil prices, has now reversed into an inventory loss," an official said. While the estimates had projected that oil companies will have to take a loss of Rs 20,000 crore on their books for the whole year, they have ended up absorbing a higher loss for the half year itself.
    When contacted, petroleum secretary RS Pandey said: "The government is aware of the deteriorating financial condition of PSU OMCs. We would do everything possible so that the three Navratnas would close the financial year with profit."
    Companies are incurring losses despite softening of crude oil prices since July this year (from a peak of $147/barrel) mainly due to inventory losses, liquidity crunch, rising interest burden (from 8% in Q1 to 13-14% in Q2) and the depreciating rupee. OMCs are still losing money from the sale of petrol, diesel, kerosene and domestic LPG.
    As per calculations in the first fortnight of October, PSU oil companies are losing Rs 2.41/litre on petrol, Rs 6.42/litre on diesel, Rs 28.07/litre on PDS kerosene and Rs 332.14/cylinder on LPG. Their total under-recoveries are stated to be around Rs 1,47,000 crore. IOC, BPCL and HPCL have reported Rs 92,853 crore under-recovery on sales of the four sensitive fuels in April-September 2008.
    It is learnt from official sources that petroleum minister Murli Deora met finance minister P Chidambaram to apprise him of the grim financial condition of the PSUs. Mr Pandey was also present in the meeting.
    Parliament has approved oil bonds worth Rs 65,942 crore that includes around Rs 14,000 bonds for Q4 of 2007-08 and advance bonds of around Rs 4,000 crore for Q3 of 2008-09.
    rajeev.jayaswal@timesgroup.com