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Indian Oil Corporation (IOC) on Tuesday reported halving of its March quarter net profit largely because of losses in the petrochemical business and shrinking margin after it announced a pre-election fuel price cut despite rising input costs.
The net profit of Rs 4,837.69 crore in January-March compared to Rs 10,058.69 crore a year back and Rs 8,063.39 crore in the preceding October-December quarter, according to a stock exchange filing by the company.
Profit was lower as refining margins dipped, the petrochemical segment turned negative, and the firm, last month, cut petrol and diesel prices by Rs 2 per litre each despite crude oil prices edging up.
Also, the company was not compensated for the Rs 1,017 crore loss it incurred on holding domestic cooking gas prices by the government, according to the filing.
However, in the full-fiscal 2023-24 (April 2023 to March 2024), India's top oil firm posted its highest-ever net profit of Rs 39,618.84 crore, larger than Rs 24,184.10 crore it had recorded in 2021-22.
The annual profit benefited from the nearly two-year-long freeze in petrol and diesel prices.
While the freeze was affected when crude oil (the input used for making fuels like petrol and diesel) started rising in 2022 post-Russia's invasion of Ukraine, international rates moderated in most of 2023, helping companies like IOC book handsome profits.
It was only in mid-March that petrol and diesel prices were cut by Rs 2.
The rate cut, which came just before the general elections, happened when crude oil prices started inching up.
Pre-price cut, breakeven on petrol and diesel was at a crude price of $73-74 per barrel. However, the basket of crude oil that India imports has averaged $89.52 this month.
During the January-March quarter, IOC suffered a loss of about Rs 400 crore in the petrochemicals business, while earnings from petroleum product sales were trimmed by 38 per cent.
The company sold 23.73 million tonnes of petroleum products in the quarter, up from 22.95 million tonnes a year back and 23.32 million tonnes in the preceding quarter.
For the full fiscal, fuel sales were 92.31 million tonnes, up from 90.65 million tonnes.
Its revenue dipped to Rs 2.21 lakh crore in January-March from Rs 2.28 lakh crore a year back. For the full fiscal, revenue fell to Rs 8.71 lakh crore from Rs 9.41 lakh crore in 2022-23.
IOC said it earned $12.05 on turning every barrel of crude oil into fuel in 2023-24, down from $19.52 a barrel gross refining margin in the previous fiscal.
Besides the Rs 1,017 crore of un-compensated loss on LPG for the fiscal, the company is carrying Rs 4,796 crore of uncompensated cost from past years.
While petrol and diesel prices are deregulated, the government pays subsidies to oil companies if they hold LPG rates below cost in certain periods.
In 2022, state-owned fuel retailers IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) froze prices despite a spike in global oil prices following Russia's invasion of Ukraine.
This was with a view to insulating consumers from price volatility.
The price freeze led to the three firms incurring losses in the first half of the 2022-23 fiscal (April 2022 to March 2023).
IOC incurred a loss of Rs 2,264.88 crore in April-September 2022.
In 2023-24, oil prices declined and the freeze meant that companies booked profits.
The three firms in the first nine months of the fiscal, posted profits that were more than their previous highest-ever net profit.
IOC declared a final dividend of Rs 7 per equity share for 2023-24.
This is in addition to the interim dividend of Rs 5 per share paid during the year.
Chairman SM Vaidya said, "IOC sold 97.551 million tonnes of products, including exports, during FY2023-24.
"Our refining throughput for FY 2023-24 was 73.308 million tonnes and the throughput of the corporation's countrywide pipeline network was 98.626 million tonnes during the year".