IOC posts record loss of 22,451 crore in Q1 Oil Cos Bleed As Govt Fails To Dole Out Subsidies, HPCL Hit By Q1 Loss Of 9,428Cr

New Delhi: It was a day of historical losses for the state-run fuel retail industry on Thursday. Market leader IndianOil Corporation (IOC) reported the biggest-ever quarterly loss by a listed company at Rs 22,451 crore in the April-June period, while its sister firm Hindustan Petroleum (HPCL) saw its bottom line sink by Rs 9,428 crore in the same quarter.      The latest loss figures are a telling commentary on the government's handling of fuel pricing policy. The companies have suffered the losses because the Centre failed to keep its word to compensate them for selling diesel and kitchen fuels at artificially low prices set by the government. IOC's loss is three times its previous record of a Rs 7,485-crore loss registered in the second quarter of 2011-12. Going by past experience, the companies would in all likelihood post a profit at the end of the fiscal in March, 2013, when the government finally pays up the subsidy amount. But until then, these companies would go through the vicious cycle of borrowing more and spending more to keep going. While that would ensure uninterrupted fuel supply to consumers, the rising interest costs would shave their profit and reduce the ability to push new projects or modernize, which is key to future survival.      "We had a net loss of Rs 22,451 crore in the April-June quarter as compared to Rs 3,719 crore loss in the same period a year ago... The losses are primarily because we did not get Rs 22,451 crore in government subsidy," IOC chairman R S Butola said.      Lack of timely release of government subsidy has pushed up IOC's borrowings by Rs 15,000 crore in the quarter to a total of Rs 90,923 crore. The company spent Rs 1,840 crore in the quarter on interest alone, the company's director (finance) P K Goyal said. "This burden would put increasing pressure on the company's bottom line if debt rises further," he added. Besides the unmet fuel subsidy, IOC also ran up a loss of Rs 3,187 crore due to rupee depreciation and higher interest costs. Also, the firm lost Rs 4,062 crore in inventories because of international crude price swings. IOC posted a negative gross refining margin of $4.81 per barrel as compared to an earning of $4.71 on extracting products from a barrel of crude in the first quarter of 2011-12. Diesel and kitchen fuels are not the only problem areas. The companies have also suffered losses on petrol, which is officially free of government control. But being the majority owner, the oil ministry informally dictates decisions on raising the fuel's price in accordance with political expediency.      "Our plea with the government is that if we are not allowed to raise petrol price due to inflationary concerns, the product should be brought under control and subsidy provided," Butola said.      Since petrol price has not been revised often, IOC is losing Rs 1.37 per litre on petrol. Besides, it is losing Rs 12.13 on a litre of diesel, Rs 28.54 on a litre of kerosene and Rs 231 on each cooking gas cylinder refill. At prevailing crude and rupee-dollar exchange rates, IOC, Bharat Petroleum and HPCL together are projected to lose Rs 1,77,715 crore on sale of diesel and kitchen fuels if pump prices are not raised. FUELLING WORRIES 1,77,715cr  The amount IOC, BPCL and HPCL are expected to lose this fiscal on the sale of diesel & kitchen fuels if prices are not revised  90,923cr  Total borrowings of IOC after Q1, which went up by Rs 15,000 crore in the quarter as govt failed to release subsidy IOC LOSSES  3,187cr due to Re depreciation, higher interest 4,062cr due to global crude  price swings Times View: Free fuel prices      The government's indecision on fuel price decontrol is not just affecting its finances but also the fortunes of state-run oil companies, several of whom ranked among the top players until recently. In any case, it makes little sense for the government to force its policies on companies where it is not the sole shareholder. If a subsidy is required, then the government should bear it through the Budget, instead of making top PSUs bleed.