Pratim Ranjan Bose

Kolkata , July 1

BARRING some drastic change in the revenue-sharing arrangement, which could hit ONGC and GAIL hard, the Rs 1,50,000-crore Indian Oil Corporation is going to register losses in the first quarter of the current fiscal, for the first time in its 40-year history.

The story may not be much different for other oil marketing companies. IBP, which is now in the IOC fold, is also deep in the red.

ONGC shared more than Rs 4,000 crore in the form of price discounts with Indian Oil, Bharat Petroleum and Hindustan Petroleum on crude oil sold to them. GAIL had to bear a burden of Rs 1,137 crore. Together, they shared one-third of the total subsidy bill. While the Ministry is yet to announce the subsidy-sharing formula for the year, oil marketing companies are pressing for increased sharing by the upstream companies and the stand alone refineries, which is contested both by ONGC and GAIL through separate presentations.

Sources told Business Line that IOC's under-realisation on account of sale of subsidised kerosene and domestic LPG and under-recoveries on sale of petrol and diesel have been in the region of Rs 4,500-5,000 crore in the first three months. The under-recovery and under-realisation stood at Rs 3,600 crore in the first two months. Unlike last year, when IOC could generate some margin out of marketing of petrol and diesel for part of the year, this year the company had been losing heavily from day one. IOC had registered a staggering Rs 7,777 crore under-realisation and under-recovery during 2004-05. That the company could still register a profit of Rs 4,891 crore, 30 per cent down from the previous year, was primarily due to the high gross refining margins (GRM) the company could generate.

While there is no denying that GRM continues to be high, keeping in tune with the spiralling crude prices, IOC sources clarify that for the first three months the company could not generate GRM to offset the losses in marketing.

"As things stand today, we cannot avoid losses until and unless the upstream oil companies and the stand alone refineries share a greater burden," senior level IOC sources told Business Line. "The situation could be worse for IBP, which had increased its volume sales and is not backed up by a refining margin."

It may be mentioned that IBP always operated upon low margins and used to cover this through volume sales. The company had more than doubled its outlets in last two years and increased its market share to close to 10 per cent last year. The marketing drive has boomeranged ever since crude prices started spiralling at a faster rate.

Talking about the recent ad-hoc upward revision of petrol prices by Rs 2.50 and diesel by Rs 2 a litre on June 20 (which took place at the end of six months since the last revision in November 2004), the sources said it might not even be sufficient to offset the excise and additional road cess burden.

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