The Hindu Business Line : IOC to get Rs 7,000-cr oil bonds by month-end

Impact of discounts
Price discounts of about $1.53 per barrel, together with incremental market-related under-realisation, pushed down Gross Refinery Margins to $4.60 per barrel from $6.21 per barrel in the previous year.

MR SARTHAK BEHURIA (left), Chairman, IOC, with Mr Anil Razdan, Director, at the company's AGM in Mumbai on Friday. - Paul Noronha

Mumbai , Sept. 22

Indian Oil Corporation (IOC) will be receiving Rs 7,000-crore worth oil bonds from the Government by month-end, which is expected to provide a significant shot in the arm for the oil major.

A provision was made in the Union Budget 2005-06 for additional support to oil marketing companies by way of oil bonds, over and above the amount allowed as subsidy. The oil bonds have helped these companies to tide over the financial crunch to some extent. The substantial rise in the burden of under-realisation strained the budgetary resources of the state-owned oil marketing companies, including IOC.

Addressing the 47th Annual General Meeting, Mr Sarthak Behuria, IOC Chairman, said the Rs 7,000-crore oil bonds would significantly improve the company's bottomline.

He said price discounts of about $1.53 per barrel, together with incremental market-related under-realisation, pushed down gross refinery margins to $4.60 per barrel from $6.21 per barrel in the previous year.

Talking to presspersons, Mr Behuria said the company expected to wipe out losses on diesel at the current crude prices by the next quarter.

It also expected its monthly revenue losses (due to retail sales at a discount) to fall by 50 per cent in the wake of the softening of crude prices.

The company will be investing Rs 8,000 crore in the current fiscal for various expansion programmes in the refining and petrochemical segments.

"We nurture a vision of growing from a $41-billion turnover company today to $60 billion by 2011-12, with investments of Rs 55,000 crore," he said, adding that by that year the company would be refining 80 million tonnes per annum.

Consolidating presence

IOC also plans to consolidate its presence in the petrochemicals segment.

Besides the two petrochemical hubs shaping up at Panipat and Paradip and equity investment in Haldia Petrochemicals, the company is planning to develop a chemical park in Haldia.

In the "high-risk" business of exploration and production, the company faces the challenge of "expeditious entry into farm-in arrangements and acquisition of companies or assets to quickly expand the upstream portfolio and eventually gain expertise to become an E&P operator," Mr Behuria said.

Gas distribution

The IOC chief said the company was in talks with Reliance Industries and GAIL to enter the city gas segment.

"Nothing has been finalised yet, but we want to take up gas distribution in cities and towns in a big way," he said.

In its second year in gas marketing, the company sold about 1.30 million tonnes of re-gassified LNG last fiscal.

A contract was signed with Petronet LNG for purchase of an additional 0.75 million tonnes of LNG per annum, which would be supplied through RasGas of Qatar from October 2009.

On the market scenario, Mr Behuria said the Indian basket of crude oil rose from less than $30 per barrel in 2003-04 to $67 per barrel in the first quarter of 2006-07 and $71 per barrel in August this year.

"However, this month brought a welcome respite, with the average price of Indian basket coming down to about $63 per barrel," he said.

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