Advantage PSU oil firms
alling oil prices helped India’s largest oil explorer Oil and Natural Gas Company (ONGC) and its largest oil marketing company Indian Oil Corporation (IOC) improve their net profits strongly in the first quarter of this financial year, both companies reported on Thursday.
While ONGC saw its net profit up 14.2 per cent compared to the first quarter of FY15, IOC saw its net profit rising by almost 2.5 times in the same period.
ONGC saw its net profit at Rs.5,459 crore in the quarter ended June FY16, compared to Rs.4,782 crore a year earlier. Profits rose for the company faster than its total income from operations. Income from operations in the first quarter of FY16 stood at Rs.22,739 crore, up 4.2 per cent over the previous year.
The faster growth of profits can be attributed to lower discounts it gave to refiners following the fall in the price of crude oil. Upstream PSU companies such as ONGC and Oil India usually sell crude oil at discounted rates to refiners to partly compensate them for losses the latter might incur on selling fuels such as gasoline and LPG at government-set discounted rates.
While the impact of discounts on profits was Rs.628 crore during the June quarter of this financial year, it was more than 10 times that amount, at Rs.7,396 crore, in the same period the previous year.
Falling oil prices helped India’s largest oil marketing company IOC as well. The company saw its net profit shoot up more than 2.5 times to Rs.6,435.70 crore in the first quarter of FY16, compared to Rs.2,522.94 in the previous year. This is despite a 19 per cent fall in its net revenue to Rs.1,01,306 crore in the June FY16 quarter from Rs. 1,24,956 crore in the same quarter in FY15. “The increase in net profit during the first quarter of the current year vis-a-vis the same quarter of the last year is mainly attributable to increased refining and petrochemical margins,” the company said on its website.
The company reported a gross refining margin of $10.77 a barrel in the reported quarter, compared to just $2.25 a barrel the previous year. The gross refining margin (GRM) is essentially the difference between the value of petroleum products produced by the refinery and the cost of the raw material — crude oil — used in the process. So, the ongoing fall in oil prices greatly increases these margins, and hence the profits of OMCs.
The other major OMC to declare its results so far, Hindustan Petroleum Corporation, reported on Tuesday that its net profit jumped 35-fold in the first quarter of FY16 compared to the previous year. Net profits for the country’s third-largest OMC stood at Rs.1,588 crore, as against Rs.46.04 last year.
The company also benefited from falling oil prices, reporting much better refining margins, at $8.56 per barrel during the June FY16 quarter compared to $2.04 per barrel in the previous quarter, thus boosting its profits.
Oil India, India’s second-largest state explorer, reported on Wednesday that it registered a 9 per cent de-growth in net profits, at Rs. 775 crore for the quarter ended June FY16.
The company said its revenue fell by Rs.167 crore due to the sharing of under-recoveries of downstream oil PSUs on the sale of diesel, LPG and PDS kerosene.
https://www.thehindu.com/business/Industry/advantage-psu-oil-firms/article7536200.ece
