New Delhi, June 3 : Dismissing the “false impression” of having made huge profits, chief executives of the three state-owned oil firms on Sunday said a combined bailout package totalling a whopping Rs. 1,38,500 crore had helped them report nominal profits in 2011-12 fiscal.
In an unusual joint statement, Indian Oil chairman R.S. Butola, Bharat Petroleum chief R.K. Singh and Hindustan Petroleum CMD Subir Roy Chowdhry said contrary to the false impression of oil marketing companies (OMCs) making huge profits in 2011-12, the oil firms had “incurred huge losses of Rs. 15,100 crore in the first nine months (April-Dec 2011)”.
The statement came in response to a letter by Overseas Indian Affairs Minister Vayalar Ravi to Oil Minister S. Jaipal Reddy saying the claim made by oil companies that they are running in loss seems to be untrue in view of the profits they reported in fourth quarter ended March 31, 2012.
Ravi in the letter stated that the IOC made a profit of Rs. 12,670 crore in January-March quarter and BPCL Rs. 3,962 crore.
It, however, said the three oil firms had reported a net loss of over Rs. 15,100 crore in first three quarters which was being ignored in making such statements.
“The companies incurred losses due to sale of three products, namely diesel, domestic cooking gas LPG and PDS kerosene at highly subsidised prices,” the statement said.
“It is only after the assistance (subsidy) of Rs. 83,500 crore from the government and Rs. 55,000 crore (grant) from the upstream oil companies (ONGC, OIL and GAIL), totalling Rs. 1,38,500 crore, the three public sector OMCs could declare nominal profits,” it said.
Had this assistance not been given, the three OMCs would have reported a combined loss of Rs. 1,32,000 crore, it said.
The three OMCs together had a combined turnover of Rs. 8. 33,000 crore during 2011-12. Against this, they had declared a combined profit of mere Rs. 6,177 crore, which is only 0.7 per cent of their turnover.
“This level of profit is not adequate for OMCs to enable them to incur huge expenditure on continuous modernisation, making available environmentally compliant fuels, laying of pipelines, enhancing storage, and development of other infrastructure,” it said.
The OMCs, it said, “are enabled to announce at least nominal profits for maintaining their blue chip status and credit ratings at the global level“.
Because of the highly subsidised sale of diesel, domestic LPG and PDS kerosene, the three firms are under huge financial strain.
“Their combined borrowings have gone up from Rs. 97,000 crore in March 2011 to a whopping amount of Rs. 1,28,000 crore in March 2012,” the statement said adding their interest burden has gone up from Rs. 4,700 crore in 2010-11 to Rs. 9,500 crore in 2011-12.
“If the government and upstream assistance was not made available to the OMCs, to make good their losses, they would not have been in a position to raise necessary finance to purchase crude from the international market and maintain uninterrupted supply of petroleum products in the country,” it said.
Even though petrol had been deregulated in June 2010, the three fuel retailers incurred losses of Rs. 2,300 crore in 2010-11, Rs. 4,900 crore in 2011-12 and Rs. 2,300 crore in the current financial year (till May 23, 2012) by way of not raising rates due to political reasons.
“Because of the inability of the OMCs to increase the price of petrol for long time, the situation became such that the correction in the price of petrol was absolutely unavoidable,” it said referring to the May 24, 2012 hike of Rs. 7.54 a litre in the product cost.
The oil firms said the average price of crude oil was only $85 per barrel in 2010-11 which went up to $112 a barrel in 2011-12, an increase of 32 per cent.
Besides, the value of rupee has depreciated from Rs. 46 per U.S. dollar in September 2011 to Rs. 54.5 per U.S. dollar in May 2012.
“The double disadvantage of increase in oil prices and sharp rupee depreciation have affected the oil sector in India on an unprecedented scale,” it said.
“Both the consumers and commentators are requested to understand the special difficulty the country is facing at present,” it added.