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NEW DELHI: State-owned fuel retailers — Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum — are likely to end the fiscal with a loss of Rs. 47,960 crore on selling petrol, diesel, domestic LPG and kerosene below cost. “The three firms lose Rs. 250 crore every day on selling the four products below imported cost,” an official said. Losses on fuel sales have widened as global oil prices have firmed up in March. IOC, BPCL and HPCL at present sell petrol at a loss of Rs. 6 a litre, Rs. 4.06 a litre on diesel, Rs. 16.91 a litre on PDS kerosene and Rs. 267.39 per LPG cylinder (14.2-kg). The revenue loss for 2009-10 has widened to Rs. 47,960 crore from the earlier projection of Rs. 45,000 crore. While the losses on petrol and diesel are met by upstream firms such as ONGC, the government had not kept its promise to make up all of the revenues lost on selling LPG and kerosene, he said. Of the Rs. 29,353-crore loss in the April-December period, upstream firms contributed Rs. 8,364 crore to cover the entire shortfall on petrol and diesel. But of the Rs. 20,989-crore loss on LPG and kerosene in the first nine months, the finance ministry has provided only Rs. 12,000 crore. Besides the Rs. 8,989 crore uncovered amount of April-December, about Rs. 12,000 crore of revenue loss on LPG and kerosene in January-March quarter also remains uncovered. The official said IOC, BPCL and HPCL would get only Rs. 12,000 crore to make up for part of the losses on LPG and kerosene. IOC would get Rs. 7,100.18 crore, BPCL Rs. 2,370.77 crore and HPCL Rs. 2,529.05 crore. The compensation is, however, less than Rs. 20,989 crore sought by the retailers to make up for the losses they incurred on selling domestic LPG and kerosene below cost during AprilDecember.
15th march Low margins hurt bottom line, stocks
The share prices of public sector oil marketing companies like Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) are stagnating even though these companies have registered strong revenue growth in recent years. It is because the government’s policy to regulate retail prices of key petroleum products like petrol, diesel, domestic LPG and PDS kerosene has led to declining net profit margins for these companies. This is a big let-down for retail investors who had bought shares of these companies on the hope that the government would deregulate the sector. IOC has 2,11,702 retail investors, BPCL has 77,927 and HPCL 87,460. HPCL’s sales were Rs 10,596 crore in the financial year 2092-93. It rose to Rs 1,25,658 crore in the financial year—a growth of over 11 times. But during the same period, the price of its share increased by just 4.9%.
"The movement is based more on expectations of a global economic recovery. the under-recoveries for oil marketing companies (OMCs like HPCL [ Get Quote ].7% in 2094-95. too. The government has been compensating the OMCs’ under-recoveries on domestic LPG and PDS kerosene in cash or oil bonds. For example. Meanwhile. has also seen deep reduction in net profit margin. will feel the heat. diesel.66% in 2092-93 to 0. A bigger respite. BPCL’s net profit margin declined from 1. however. 2010 13:26 IST US crude oil futures edged down on Tuesday after hitting an 8-week high of $82 a barrel on Monday.54% in 2008-09.46% in 2008-09. but it is controlling retail prices of key petroleum products through fiat in the absence of political consensus over deregulation.000 crore for 200910 and at Rs 62.91% in 2008-09. and thus. though the company’s sales rose by over 13 times during this period.92 million barrels per day. IOC.6% for 2008-09. Crude oil imports surged 17. A stronger US currency makes the dollar-denominated oil more expensive for buyers holding other currencies. its net profit margin declined drastically. The government dismantled the administered price mechanism (APM) regime in 2002. It plunged to 2. A strengthening dollar is also a cause for concern.8 per cent year-on-year in January 2010 to 2. In comparison. the shares of these companies fall on the fear that their under-recoveries would rise. HPCL’s net profit margin fell from 2. BPCL [ Get Quote ] and IOC) are pegged at Rs 43. This uncertainty is a major turn-off for investors. The past one month has seen crude oil prices rise over 12 per cent to touch the recent high. whose shares were listed on the exchanges in 1994." says Saeed Jaffery. came in the form of the rupee's 2. the net profit margin of Reliance Industries Ltd’s (RIL) petroleum refining and marketing business was 8. Ambit Capital. The stock market performance of these oil marketing companies is closely linked to their underrecoveries on petrol. A small respite for OMCs. rather than the recovery itself. At an average price of $68 a barrel. Indian companies. If International crude oil prices go up. While the company registered a decent growth in its revenues during the period. would come if the prices of . Analysts expect the prices to range $75-$85 a barrel in the next one year. A move towards the higher end of the range will see a drop in demand. domestic LPG and PDS kerosene. Crude oil prices: Reaching a boiling point? March 11. as the country imports nearly 70 per cent of its oil requirements.5 per cent appreciation against the dollar in the last one month. analyst. prices will begin to recede. The company’s net profit margin was 6.It is not difficult to explain the paradox. though. However. there is little certainty as to when and how much compensation would be provided. The US Dollar Index moved up nearly a per cent during the last month.14% in the financial year 2092-93 to 0.000 crore in 2010-11 with average price at $75 a barrel.
State-run fuel retailers are projected to lose Rs 47.989 crore sought by the retailers to make up for the losses they incurred on selling domestic LPG and kerosene below cost during AprilDecember period.370.49%.000-crore compensation would be given as cash from Budget. BPCL Rs 4. Sector-wise.11%. 2010.423 crore. IOC had sought Rs 12. Market Commentary and Intraday News Indian Market Pares Early Gains 22 days ago(Mar 10th ) (RTTNews) . but Essar Oil gained 0. but did not say if the Finance Ministry was inclined to release more money. however.574 crore revenue loss on cooking fuel is to be made good by the government. Minister of State for Finance Namo Narain Meena said in a written reply to Lok Sabha here. After rising to as high as 17.147 crore and HPCL Rs 4.18 crore. The markets have been swift to sense this. he said. . a departure from the practice of issuing bonds to make up for fuel losses. IOC would get Rs 7.30% and Indian Oil Corp rose 0. Oil explorer Reliance Industries. FMCG.petrol and diesel. BPCL advanced 0. the losses on petrol and diesel are made up by upstream firms like Oil and Natural Gas Corporation (ONGC) while.100. BPCL Rs 2. diesel.29% at 5. Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) Rs 12. metal.27% while the Nifty ended up 15 points or 0. the benchmark Sensex pared gains and slipped further into the red before finishing at 17. The compensation is. But.72%. another rise may be a few months away. which has a 12. banking and capital goods stocks ended in the red. less than Rs 20. oil/gas.184 earlier in the session. as against the Sensex's 5 per cent rise. up 46 points or 0.529. rose nearly 2%. ended in the red.400 crore on selling petrol.77 crore and HPCL Rs 2. domestic LPG and kerosene below cost.000 cr in cash Press Trust of India / New Delhi March 05. while IT.05 crore. Thus.000 crore to partly compensate them for losses on LPG and kerosene by March 31. realty.419 crore. 16:22 IST he government will give state fuel retailers Indian Oil Corporation (IOC). Of these. auto and consumer durable stocks showed strength. PSU oil firms to get Rs 12. are increased.116. Stocks of OMCs have fallen 5-8 per cent in the last fortnight. however. as suggested in the Kirit Parikh committee. since the government has faced stiff opposition after it raised duties on these fuels in the Budget. Rs 31.2% each and the market breadth was fairly negative. the mid-cap and small-cap indexes fell around 0. the profitability of these companies may get impacted. On the BSE. ONGC edged down 0.5% weight in the 30-share Sensex. The broader indexes. healthcare.098. unless the government compensates OMCs with cash or oil bonds. The Rs 12.The Indian market ended a volatile session off the day's high as profit taking emerged at higher levels following recent sharp gains.
39 per cylinder.27 per litre. .The compensation indicated till now leaves a gap of Rs 19. kerosene at Rs 16. Retailers currently sell petrol at a loss of Rs 4.91 per litre and LPG at a loss of Rs 267.97 a litre.574 crore. diesel at Rs 3.
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