BPCL posted a net profit of ₹22,449.32 crore in the 9-month period of current fiscal as compared to a loss of ₹4,607.64 crore in the same period last year.
| Photo Credit: The Hindu

State-owned fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) reported bumper profit totalling more than ₹69,000 crore in the first nine months of the current fiscal which far exceeded their annual earning in pre-oil crisis years.

The combined net profit of IOC, BPCL and HPCL in April-December FY24 was better than their annual earning of ₹39,356 crore in pre-oil crisis year, regulatory filings by them showed.

The retailers have resisted calls to revert to daily price revision and pass on softening in rates to consumers on grounds that prices continue to be extremely volatile — rising on one day and falling on the other — and that their past losses have not been fully recouped.

The three companies, which control roughly 90% of India’s fuel market, ‘voluntarily’ have not changed petrol, diesel and cooking gas (LPG) prices for almost two years now, resulting in losses when input cost was higher and profits when raw material prices were lower.

They posted a combined net loss of ₹21,201.18 crore during April-September 2022 despite accounting for ₹22,000 crore announced but not paid LPG subsidy for the previous two years.

Subsequent softening of international prices and government giving out LPG subsidy helped IOC and BPCL post annualised profit for 2022-23 (April 2022 to March 2023 ) but HPCL was in the red.

This fiscal year, things have changed dramatically. The three firms posted record earnings in the first two quarters (April-June and July-September) when international oil prices — against which domestic rates are benchmarked — almost halved to $72 a barrel from a year ago.

International prices rose again in the subsequent quarter to $90, leading to moderation of their earnings. But, on a year as a whole they had rich profits. “IOC in the first nine months of the current fiscal (April-December 2023) posted a standalone net profit of ₹34,781.15 crore,” according to the company’s regulatory filing.

This compared with ₹8,241.82 crore annual net profit in 2022-23. While the company could argue that FY23 was impacted by the oil crisis, the 9-month earnings are higher than even the pre-crisis years — ₹24,184 crore net profit in 2021-22 and ₹21,836 crore in 2020-21.

BPCL posted a net profit of ₹22,449.32 crore in the 9-month period of current fiscal as compared to a loss of ₹4,607.64 crore in the same period last year.

This profit was higher than ₹1,870.10 crore earning in 2022-23 and ₹8,788.73 crore in FY22. HPCL’s 9-month profit of ₹11,851.08 crore compared with a ₹8,974.03 crore loss in FY23 and a profit of ₹6,382.63 crore in 2021-22.

The fuel price freeze that began on April 6, 2022, had a loss as high as ₹17.4 a litre on petrol and ₹27.7 per litre on diesel for the week ended June 24, 2022. However, subsequent softening led to losses being eliminated. The three firms had a margin of ₹11 a litre on petrol and ₹6 on diesel last month.

According to Girishkumar Kadam, senior vice-president and group head, corporate ratings, ICRA Limited, the three oil marketing companies reported healthy operating margins in H1 FY24, recouping the losses incurred during FY2023.

“The aggregate operating profitability of the OMCs was ₹90,000 crore in H1 FY2024 against a loss of ₹14,600 crore in H1 FY2023.” International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 — climbing to a 14-year high of nearly $140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction. But for a nation that is 85% dependent on imports, the spike meant adding to already elevated levels of inflation and derailing the economic recovery from the pandemic.

So the three fuel retailers froze petrol and diesel prices for the longest duration in the last two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices.

The freeze continued into 2022 but the war-led spike in international oil prices prompted a ₹10 a litre hike in petrol and diesel prices from mid-March 2022 before another round of excise duty cut rolled back all of the ₹13 a litre and ₹16 a litre increase in taxes on petrol and diesel done during the pandemic. That followed the current price freeze which began on April 6, 2022 and still continues.

Stock exchanges have slapped fines on state-owned oil and gas firms including IOC, ONGC and GAIL for their failure to meet listing requirements
| Photo Credit: Reuters

Stock exchanges have slapped fines on state-owned oil and gas firms including IOC, ONGC and GAIL for their failure to meet listing requirements of having a requisite number of independent directors and women directors.

In separate filings, the companies detailed the fines imposed by the BSE and NSE but were quick to point out that appointment of directors was done by the government and they had no role in it.

Oil and Natural Gas Corporation (ONGC) was slapped a ₹3.36 lakh fine, while Indian Oil Corporation (IOC) was asked to pay ₹5.36 lakh fine.

Gas utility GAIL was slapped ₹2.71 lakh fine, Hindustan Petroleum Corporation Ltd (HPCL) ₹3.59 lakh, Bharat Petroleum Corporation Ltd (BPCL) ₹3.6 lakh, Oil India Ltd ₹5.37 lakh and a fine of ₹5.37 lakh was imposed on Mangalore Refinery and Petrochemicals Ltd (MRPL).

Except for IOC which was slapped with the fine for not having the required one woman director on the board, all the companies were fined for violating the norm of having the required number of independent directors.

IOC said the power to appoint directors (including independent and women directors) vests with the Ministry of Petroleum and Natural Gas, Government of India.

“And hence the non-appointment of women independent directors on the Board during the quarter ended June 30, 2023 was not due to any negligence / fault by the company,” it said. “Accordingly, Indian Oil should not be held liable to pay the fines and the same should be waived-off”.

IOC said it regularly takes up the issue with the ministry, for appointment of requisite number of independent directors (including Woman independent director), to ensure compliance with corporate governance norms.

“We would also like to inform that the company had received similar notices from the BSE and NSE in the past imposing fines and waiver requests from the company was considered favourably by the exchanges,” it said.

HPCL made a similar filing and cited past record of stock exchanges waiving such fines.

ONGC said it has requested the government for nomination of the requisite number of independent directors on the board of the company.

“Since the appointment of directors is beyond control of the company, request letters have been submitted to stock exchanges for waiving off the fine levied,” ONGC said.

BPCL said it had complied with the requirements for the financial year 2022-23 and till April 30, 2023.

But the appointment of a full-time directors with effect from May 1, 2023 led to BPCL having five whole-time Directors, two nominee directors of the government and six independent directors.

As per norm, BPCL should have had seven independent directors – equal to the executive directors (five whole-time directors and two government nominee directors).

BPCL said it has “requested the Government of India from time to time for the nomination of one independent director. As the directors are appointed after receipt of nomination from Government of India. BPCL has no control over the appointment of Directors.”

The firm said it will be approaching BSE Limited and National Stock Exchange of India Limited for waiver of the fines. “Similar letters were received earlier from the stock exchanges for which waiver request was made by BPCL and the same was considered favorably by the stock exchanges,” the filing said.

Oil India Ltd (OIL) said the non-compliance was beyond the control of the company as it is a government enterprise and directors are appointed by the administrative ministry, Ministry of Petroleum and Natural Gas.

MRPL said it is following up with the government from time to time for appointing the required number of directors on its board.

GAIL said, “all the directors on the board of GAIL (including independent directors) are nominated/appointed by the Government of India. As such, appointments are outside the purview/control of the GAIL’s management.”

Petrol sales fell 8 per cent to 1.19 million tonnes in the first fortnight of August 2023, when compared with the same period last year. File photo
| Photo Credit: Nagara Gopal

India’s petrol and diesel consumption fell in the first half of August from the previous month and a year ago, as monsoon rains hit mobility and slowed industrial activity, preliminary data of state-owned firms showed on Wednesday, August 16, 2023.

This is the second month in a row that fuel sales have fallen. The four months of monsoon generally see muted consumption.

Also read: PM Modi rolls out 20% ethanol-blended petrol in 11 States/UTs

Consumption of diesel, the most consumed fuel in the country accounting for about two-fifths of the demand, fell 5.7 per cent to 2.67 million tonnes from August 1 to 15, compared to the year-ago period.

Consumption had fallen by a steep 15 per cent in the first half of July but picked up in the second fortnight.

Month-on-month sales fell 9.5 per cent, when compared with 2.95 million tonnes of diesel consumed in the first half of July.

Diesel sales typically fall in monsoon months as rains lower demand in the agriculture sector which uses the fuel for irrigation, harvesting and transportation. Also, rains slow vehicular movements.

Consumption of diesel had soared 6.7 per cent and 9.3 per cent in April and May, respectively as agriculture demand picked up and cars yanked up air-conditioning to beat the summer heat. It started to taper in the second half of June after the monsoon set in.

Petrol sales fell 8 per cent to 1.19 million tonnes in the first fortnight of August, when compared with the same period last year.

Consumption had dropped 10.5 per cent in the first fortnight of July but picked up in the latter half. Sales were down 5.2 per cent month-on-month, the data showed.

India’s economy has demonstrated remarkable resilience and is likely to have surpassed the performance of most major economies during the first half of 2023.

With steady and healthy economic activity and ongoing air travel recovery, India’s demand for oil products is anticipated to remain strong in the remainder of the fiscal, analysts said.

Consumption of petrol during August 1-15, was 20.6 per cent more than in the COVID-marred first half of August 2021 and 25.6 per cent more than in pre-pandemic August 2019.

Diesel consumption was up 26 per cent over August 1-15, 2021 and 16.8 per cent when compared with August 1-15, 2019.

Rise in ATF demand

With the continuing rise in passenger traffic at airports, jet fuel (ATF) demand rose 8.1 per cent to 290,300 tonnes during the first fortnight of August as compared to the same period last year.

It was 66.7 per cent more than in August 2021, but 4.1 per cent lower than pre-COVID August 2019.

Month-on-month jet fuel sales fell 2.1 per cent when compared with 296,500 tonnes in July 1-15, 2023.

Cooking gas LPG sales were up 3.7 per cent year-on-year to 1.21 million tonnes in August 1-15. LPG consumption was almost 12 per cent higher than in August 1-15, 2021 and 11.2 per cent more than pre-COVID August 1-15, 2019.

Month-on-month, LPG demand was however down 2 per cent compared to 1.23 million tonnes of LPG consumption during July 1-15, the data showed.