The Hindu Business Line : Mounting losses on petro-products sale — IOC puts on hold Paradip refinery and petrochem project

MOUNTING losses due to the Government's refusal to increase petroleum prices has forced Indian Oil Corporation Ltd to put its large capital investments on hold.

As a fallout, IOC's Rs 15,000-crore Paradip refinery and petrochemicals project will now get further delayed.

"We had committed a capital expenditure of Rs 7,500 crore during the current plan period. While the smaller projects will continue, we will be forced to put large projects on the back burner for the time being," the IOC Chairman, Mr Sarthak Behuria, told Business Line here. Asked specifically about the 15 million tonnes greenfield refinery at Paradip in Orissa, which has not taken off in the last four years due to a glut in the industry, Mr Behuria said that the project would be delayed further.

IOC has lost Rs 3,200 crore in the first quarter. For July, the gross losses stand at Rs 1,800 crore and after taking into account the burden shared by upstream company Oil and Natural Gas Corporation, the loss works out to Rs 1,200 crore.

"Our borrowings will go up to Rs 19,000 crore in the current year. A large part of the borrowings would be used to meet our working capital requirements," Mr Behuria said.

As of now, IOC's debt to equity ratio is at a healthy 0.62, but those numbers look set to go haywire, he said, pointing out that the company's capacity to borrow would be adversely affected and its interest burden would go up in the long run.

As the oil companies bleed, Mr Behuria said that the Government will have to urgently find ways to offset the losses being incurred by the oil marketers.

For the entire year, IOC could end up losing over Rs 12,000 crore if it was not allowed to raise petroleum product prices in line with the soaring international prices of crude oil. The price of the Indian basket of crude has been hovering at $57-58 in the last few days.

"While crude prices have doubled in the last two-and-a- half years, motor spirit prices have risen by 30 per cent and diesel by 20 per cent.

As of now, oil companies are incurring a loss of Rs 3.5 on every litre of petrol, Rs 4.5 per litre on diesel, Rs 11 per litre on kerosene and Rs 100 per cylinder on LPG," Mr Behuria said.

Asked what could be the way out, Mr Behuria said that it was up to the Government to take a decision.

"All I am concerned about is how I get Rs 12,000 crore. Whether the Government raises product prices, cuts duties or gives us bonds is their prerogative. Ultimately, the Government will have to foot the bill if oil companies continue to bleed," he said.

He, however, said that he was "hopeful" of some decision soon that would "make the shoe bite a little less".

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