Indian Oil Corporation Ltd (IOCL), India's largest oil refiner, expects the government to compensate oil marketing companies (OMCs) for the under-recovery on the sale of LPG cylinders, said Chairman A S Sahney in a media interaction, after announcing the company's Q3FY25 results on January 27.
In India, LPG prices are government-administered and sold at subsidised rates as well under the Pradhan Mantri Ujjwala Yojana (PMUY) scheme by state-owned oil refiners. IOCL, Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) are the three state-owned oil refiners in India.
IOC has reported an under-recovery of Rs 14,325 crore on LPG cylinders in the first nine months of the current financial year. Replying to the extent of compensation the company foresees, Sahney said the government had earlier allocated sufficient funds to cover losses and IOC expects “good” compensation this year as well.
In 2022, the government had announced a compensation of Rs 22,000 crore for the OMCs, for a cumulative loss of Rs 28,000 crore they incurred.
The upcoming budget, to be presented by Nirmala Sitharaman on February 1, is expected to include a similar allocation for the OMCs. India’s oil secretary Pankaj Jain has said that the Ministry of Petroleum and Natural Gas (MoPNG) has urged the finance ministry to compensate the oil companies.
“LPG is a national commitment. We have taken upon ourselves the commitment to supply LPG to the nook and corner of the country. Together with HPCL and BPCL, we have provided 32 crore connections to the whole of India. So, we are covering more than 1 billion people today, out of a population of 1.4 billion. Around 98-99 percent of LPG coverage is there (in India),” said Sahney.
“Indian Oil has around 50 percent market in that (LPG distribution) and this is not on a profit basis. This is being done as a commitment towards the health of the people, as a commitment to avoid biomass,” he added.
The companies have booked huge LPG under-recovery in the year as they kept cylinder prices unchanged despite high global prices of the fuel. To be sure, the country is dependent on LPG imports for the majority of domestic consumption.
BPCL and HPCL have reported under-recovery of Rs 7,228 crore and Rs 7,599 crore, respectively, in the first nine months of FY25.
IOC’s Q3FY25 financials
IOC reported 64 percent year-on-year (YoY) decline in its third-quarter standalone net profit on January 27. The drop in the company's profit was on account of under-recovery on the sale of LPG cylinders, weak product cracks and inventory losses.
IOC's average gross refining margin (GRM) between April and December 2024 stood at $3.69 per barrel, significantly lower than the $13.26 per barrel GRM reported in the corresponding quarter of the previous financial year.
The company's domestic product sales rose by 6 percent in the quarter to 24.780 million metric tonnes (MMT) from 23.328 MMT last year.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
