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Last Updated : Apr 19, 2017 03:24 PM IST | Source: CNBC-TV18

Don't see any hit on profits even if petrol pumps are closed on Sunday: BPCL

In an interview to CNBC-TV18, P Balasubramanian, Director-Finance at Bharat Petroleum Corporation Ltd (BPCL) spoke about the latest happenings in his company and sector.

Oil marketing companies (OMC) plan to revise petrol and diesel prices daily in five cities from May 1 and going forward a nationwide rollout is expected. Also in five states, on Sundays, petrol pumps will be closed.

In an interview to CNBC-TV18, P Balasubramanian, Director-Finance at Bharat Petroleum Corporation Ltd (BPCL) spoke about the latest happenings in his company and sector.

We will review closure of petrol pumps on Sundays after a few days, he said. Also, he does not see any hit on profits even if petrol pumps are closed on Sunday.

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"Profitability will not be the issue. Issue is the supply chain and distribution part of it", he said.

Below is the verbatim transcript of the interview.

Anuj: First I want to discuss petrol pumps being closed on Sunday. Is this feasible, I believe Maharashtra is one of the states?

A: I think some of the associations have given that thing. We are in dialogues with these associations. We will see how that needs to be sorted out.

Anuj: If it happens, it will lead to quite a bit of dent on profitability I assume?

A: Profitability will not be the issue. Issue is the supply side part of it and the distribution part of it.

Latha: You will end up selling the same amount of volume even with four days off?

A: That is right.

Latha: Volumes itself, I mean for three months in a row we have seen the volume of fuel products consumption falling. Is that now a worry, how would you think that you would do the quarter?

A: Petrol has done well. There are no issues on the petrol side. Diesel has been slightly lower. I think the pickup should start from now on and I think in the second half it should be moving up. Overall the diesel growth for the oil marketing companies have been negative in the current year though the last quarter the negatives were a little bit more.

However, I feel that once this year close thing comes, and then now the market is getting slowly revived, I think the diesel growth also should go in-line with the normal industry growth which we used to have at 2-3 percent. However, petrol has been very buoyant at almost around 9 percent growth in the current year.

Latha: In the quarter?

A: Quarter numbers I don’t have readily but I think that should also be around the same levels.

Anuj: Isn't this daily revision of petrol and diesel, do you think we have the systems in place, the maturity right now to look at the daily international price, daily dollar-rupee equation and what kind of marketing margins would be maintained when we are talking about the daily price revision?

A: First of all, oil companies are technologically equipped today to make the daily pricing. So, the issues of technology and the preparations on the oil company side is not an issue at all. The thing is it is basically to smoothen the volatility of the prices over a period of time. Today we are making fortnightly and then now we are planning to do it on a pilot basis to see that how things work for all the stakeholders in this retail pricing side. So, I think overall benefits will be there for all the stakeholders.

As regards marketing margins are concerned, it is a different issue. Today what we are talking about is the pricing of the product cycle in a different way than what is being currently practiced. It is a pilot basis, we have to see what are the pros and cons of this and how the things turn out once we really implement on the field. That is why we are taking a limited number, five cities to experiment with to see how the things move. After couple of months once we are stablising on it and do some course corrections if need be based upon the various impact that will be seen in the next two to three months, we will take the final call on what to do and how to do that.

Latha: Are you electronically connected to every petrol and diesel dispensing machine in the country?

A: We are electronically connected to most of the petrol and diesel positions in the country. Even today our changes in prices reflect the market prices. Only thing is that it does not capture it on a daily basis. It is getting punched over a fortnightly basis. That is what we want to try to smoothen it out now and then see on an experimental basis how the things work.

Latha: Let me come to the gross refining margins (GRMs) itself. How did the GRMs do in the quarter gone by and as well what will inventories do to that margin?

A: GRMs in the current quarter for BPCL is around USD 5 per barrel. Overall for the year also it will be more or less around that levels. There is not a huge change on the crude prices, but the end of the quarter there are some minor changes as compared to the December quarter which has gone by where we have already published the results. The impact of the prices on the crude was minimal. However, there are some impacts on the product side because of the product prices came down in the last fortnight which has got an impact on our inventory valuations.

Latha: When you said this quarter, you meant the January-March quarter?

A: Yes, that is right.

Anuj: The other issue which has been a bit of a hanging issue now, consolidation in the space. Anything fresh that you have heard from the oil ministry or from the government?

A: What you have heard in the press is what I am also hearing. Thing is that all the companies are reviewing wherever the positions as such. It is not going to be an overnight change, it will be a phased out change; that is what we are also looking at and as BPCL we are also evaluating what all the pros and cons or what all the issues that we declare. BPCL as you know that we have always believed in value creation, we have created a good number, good value for the shareholders over a period of time and any of our additions will meet for further creation of value for the all the stakeholders.

Anuj: The question here is, is this just a stake transfer from government to say Oil and Natural Gas Corporation (ONGC) or Oil India Ltd (OIL) or is this a proper merger that we are talking about?

A: I think it is too preliminary to comment on that. It is very early stages people are evaluating. The methodology and modes of these things will have to be discussed. I think perhaps three to six years down the line the clear clarity on the subjects will be there and then perhaps we can discuss more in detail in this regard.

Latha: Cochin expansion, how much of a volume expansion can we count in FY18?

A: Cochin we have technically commissioned all the plans as on March 17 except for the Petro-FCC which is also in the final stages of commissioning. Units are getting stabilised one by one. It is a sequential commissioning of the various units. For all practical purposes it is a new refinery of almost around 10.5 million metric tonne because we are replacing old crude distillation column with a new column of higher capacity taking it to 15.5 million metric tonne.

We feel that the stabilisation of the -- crude distillation unit (CDU) has stabilised already because we commissioned it sometime last quarter, sometime around the third quarter. Other units are being commissioned now and this week we will be commissioning the delayed coker unit (DCU) and other sulphur recovery units and other units will become commissioned in the periods as we go by.

So, we are hopeful that by the first half of the year, we will stabilise on all the plants and the second half we will be doing the full 15.5 million tonne capacity utilsation for the entire refinery. It is likely that almost 2.5-3 million metric tonne in the current year overall from Cochin.

Latha: One brokerage is giving an estimate of 30 percent increase in volumes in FY18, fair estimate?

A: Yes because first six months as I told you will be slightly less because the sequential commissioning.

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First Published on Apr 19, 2017 11:23 am
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