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Aided by higher inventory gains on crude oil, Indian Oil reported an 86 per cent increase in net profit for the fourth quarter of 2016-17 at ₹3,721 crore. Net profit for the corresponding quarter of the previous fiscal stood at ₹2,006 crore.
The rise in profits corresponds to higher Gross Refinery Margins. The GRM for the quarter stood at $8.95 a barrel. This was higher than the $2.99 per barrel GRM in the fourth quarter of 2015-16. Inventory gains on crude oil stood at ₹2,634 crore. Comparably, IOCL suffered an inventory loss of ₹3,417 crore in the fourth quarter of financial year 2016.
The company’s Board recommended a final dividend of ₹1 a share (10 per cent on the paid-up equity share capital) for the financial year 2016-2017. An official statement said that this is in addition to the first interim dividend of ₹13.50 per share and second interim dividend of ₹4.50 per share paid for 2016-17.
IOCL's gross refinery margins for 2016-17 rose to $7.77 per barrel from $5.06 per barrel in the previous fiscal. Inventory gains stood at ₹12,477 crore.
GST worries The company is staring at a hit in the bottom line after GST roll out from July. Director (Finance) AK Sharma said, “Around ₹5,000 crore of input credit will remain stranded due to MS (Motor Spirit or Petrol) and HSD (High Speed Diesel) not being under the Goods and Services Tax regime.” The company is in talks with the GST council to find a way to offset this credit.
Finance Minister Arun Jaitley, during the debate on GST Bills in the Lok Sabha had said that the Constitution provides that petroleum products would attract GST, though the rate has been kept at zero. Going forward, it would require only an executive decision on setting a rate on petroleum products. There has also been a call to include petroleum products under the GST regime.
Oil procurement The company has also made a saving in 2016-17 due to optimisation in crude oil procurement. Indian Oil Chairman, B Ashok said, “Indian Oil has cut down the time of finalising short term crude oil procurement tenders from 36 hours in 2014 to less than 2 hours. The savings to Indian Oil is to the tune of over ₹1,000 crore.”
Indian Oil has also increased the share of spot purchases in the total import mix. Ashok said, “The term spot agreements comprised 80 per cent of our crude oil requirements in 2014. This has come down to 68 per cent.”
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