IOC chief hints at merger with Chennai Petro, no timeline yet

He also talked about IOC’s Paradip refinery in Odisha which is looking at stable operations currently. He said the refinery is currently working at 90 percent of its capacity and commissioned pipelines connecting Paradip with Raipur and some other locations have started operating.

This year IOC is expecting volume growth of 3-4 million tonnes. “If this sort of growth rate continues then overall growth rate for the products will be in the range of 4-5 percent,” said Ashok.

He added that growth for gasoline has been robust at more than 8 percent and Liquefied Petroleum Gas (LPG) is growing at double digits. But, diesel growth has remained flat, he said.Below is the verbatim transcript of B Ashok's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Latha: You are going to be part of the Nifty and we understand that Chennai Petro is going to be merged into IOC shortly, any update you can share with us on this?A: While no decision has been taken on Chennai Petro, I am only saying that as a standalone company, in today’s volatile environment, there is certainly a problem for a standalone companies to sustain on a long-term basis. So Chennai Petro is already a subsidiary of ours and definitely we will be looking forward to see if the merger is possible. However, these are decisions which needs to be taken after considering all the stakeholders on board and we are working towards it. So let us see.Anuj: Is there any timeline for the merger of Chennai Petro with the company?A: We are working on a consensus amongst the stakeholders. So at this point of time we are taking it in those steps. So it is very difficult to mention a timeframe for a merger if any.Merger is one of the options, basically we are looking at how to improve the strength of CPCL as such, there are some opportunities for growth for the company as well and basically merger could be a good option for that company and we will need to take it further from this.Sonia: Can you elabourate what could be the options if you are looking at apart from a merger?A: It also needs lot of investments so we need to take decisions in terms of future plans for CPCL in terms of the growth of CPCL itself.Latha: What about the Paradip refinery ramp-up?A: Essentially we should look at Paradip Refinery from a few perspectives. One is that in terms of its own production, now the refinery is certainly in a much more stable mode of operations. We are currently operating at almost 90 percent of its capacity. That is number one.The second thing is its ability to meet the logistical needs of the eastern part of the country. Earlier we used to move products from elsewhere and so on. Today certainly it has helped that the product is available in large quantities from this refinery for the eastern part of the country.The third thing is that the connectivity between this refinery and some of the interior locations -- today we have commissioned pipelines, connecting Paradip with Raipur in Central India as well as to Korba as well as to Jharsuguda and so on. So all those pipeline connectivities have been established and pipelines have started operating and some of these terminals are receiving the product directly from the refinery. So in terms of overall logistics, this is going to go long way in terms of not only optimising our logistics but also ensuring that products get moved at the right time in the right quantity.Anuj: On 15th, there was no price move. The fortnightly revision of petrol and diesel didn’t take place, any reason for that?A: No, we keep reviewing on a continuous basis. There has been a little bit of firming up of prices and then there has been an easing up of prices also. It has been in a very small range.Parallely the second issue which needs to be factored is also what is our conversion, the dollar rupee rate. So that has also been moving around so we are taking decisions based on both these movements in a time bound manner. So whenever the revision is required, we will be doing it.Sonia: One concern in the market is that oil marketing companies (OMCs) have already seen the best days in terms of gross refining margins. Now that inventory gains were also be limited, do you think the glory days are over?A: There are two things which are required to be done. One is we need to keep our operational parameters under control. As Indian Oil we have been doing that fairly well over the last three years and things have only been improving, we are setting new benchmarks for operational performance.The second thing is in terms of GRMs is what is the price of crude and what is the price of the finished product in the international market. Basically, the cracks will determine the GRMs. If the operational parameters and the cracks are good, the GRMs would be good. So cracks today are in a sort of a range which is reasonable. I believe that with crude prices also being rangebound, if the cracks are in the current order then we should continue to do well.Latha: What kind of volumes do you anticipate in FY18 compared to your peers?A: Overall I think even in the current year, we are expecting a volume growth of between 3 million tonne and 4 million tonne for the year and this sort of growth rate is continuing, we expect the growth rate for overall products to be in the range of 4-5 percent. So when you talk of the entire products, this is a very good growth rate.Having said that, in gasoline, the growth rates are pretty robust. During the current year, up to now, we have been growing at more than 8 percent. Last year we had close to double digit growth. This year we are growing at a little around 8 percent mark and diesel of course is a little more flat but it is in the positive territory.Diesel has a bigger base so obviously the growth rates cannot match with that of petrol so diesel is growing. There are also other issues connected to the availability of power etc, which determines diesel demand. Definitely power availability has been very good. So to some extent, the diesel growth rates have been impacted but it is a positive growth which shows there is more moment of traffic and need for the fuel.LPG is other big product, which is growing in size because of the Pradhan Mantri Ujjwala Yojana (PMUY) programme as well as the normal growth which is happening. We are growing at double digits in LPG. So all these three products which constitute a bulk of the volumes are continuing to grow.