Indian Oil Corporation (IOC) on Friday reported a net loss of Rs 1,992 crore in the June quarter as a freeze on petrol and diesel prices wiped away record refining margins.
Net loss of Rs 1,992.53 crore in April-June compares to Rs 5,941.37 crore of net profit in the same period a year back, the company said in a stock exchange filing.
Its revenue from operations rose to Rs 2.51 lakh crore in April-June from Rs 1.55 lakh crore, mostly because of higher international oil prices.
During the quarter, IOC and other state-owned fuel retailers Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) did not revise petrol and diesel prices in line with rising costs.
The basket of crude oil India imports averaged USD 109 per barrel but the retail pump rates were aligned to about USD 85-86 a barrel cost.
This is the first quarterly loss in over two years. The company had reported a net loss in January-March 2020 but that was on account of inventory losses on processing costlier crude.
These losses negated record refining margins. IOC earned USD 31.81 on turning every barrel of crude oil into fuel at the refinery gate as opposed to a gross refining margin (GRM) of USD 6.58 per barrel in April-June 2021.
The core margin, after offsetting inventory losses, was USD 25.34 per barrel.
"However, the suppressed marketing margins of certain petroleum products have offset the benefit of an increase in GRM," the company said in notes to its accounts.
While the government has maintained that oil companies are free to revise retail prices, the three state-owned firms haven't explained the reasons for freezing the rates.
Typically, oil companies calculate a refinery gate price based on import parity rates. But if the marketing division sells it at prices less than import parity, losses are booked.
IOC reported a pre-tax loss of Rs 1,052.78 crore on petroleum product sales in April-June compared to a profit of Rs 6,708.86 crore in the year-ago period. It had a pre-tax profit of Rs 8,251.29 crore in the preceding (January-March 2022) quarter.
Also, earnings from the petrochemicals business fell to Rs 269.26 crore from Rs 1,737.82 crore in April-June 2021.
The loss was despite a 22.5 per cent rise in sales to almost 23 million tonnes and refineries converting 13 per cent higher crude oil into products.
State fuel retailers are supposed to align rates with an international cost every day. But they have periodically frozen prices before crucial elections.
IOC, BPCL and HPCL stopped revising rates ahead of assembly elections in states like Uttar Pradesh. That 137-day freeze ended in late March with prices being raised by Rs 10 per litre each before another round of freeze came in force in early April.
This is despite international oil prices soaring to multi-year high on supply concerns following Russia's invasion of Ukraine.
The government in May cut excise duty on petrol and diesel which was passed on to consumers instead of being used to square off mounting losses on the two fuel sales.
The current freeze on petrol and diesel prices, excluding the reduction due to a cut in excise duty, is now 114 days old.
Earlier this month, ICICI Securities in a report had stated that IOC, BPCL and HPCL may post a combined loss of Rs 10,700 crore in the June quarter on selling petrol and diesel at rates below cost.
It had estimated that the companies were losing Rs 12-14 per litre on petrol and diesel, completely offsetting the strong refining performance during the quarter.
Later, in a statement announcing the earnings, IOC Chairman SM Vaidya said, "IndianOil sold 24.648 million tonnes of products, including exports, during the first quarter of the financial year 2022-23".
"Our refining throughput for Q1 2022-23 is 18.936 million tonnes and the throughput of the Corporation's countrywide pipelines network, including gas pipelines, is 24.649 million tonnes during the same period," he said.