Indian Oil Corp. (IOCL), the nation’s biggest refiner, reported a loss smaller than analysts expected after receiving subsidies from the government and state oil producers for selling fuel below cost.
Net loss narrowed to 30.9 billion rupees ($506 million) in the three months ended June 30 from a record 224.5 billion rupees a year earlier, according to a statement. The median estimate of 17 analysts in a Bloomberg survey was a 55.8 billion rupee loss. Sales rose 14 percent to 1.1 trillion rupees.
Indian Oil and its state-run rivals Bharat Petroleum Corp. (BPCL) and Hindustan Petroleum Corp. depend on cash compensation from the federal government and discounts on crude oil from Oil & Natural Gas Corp. (ONGC) and Oil India Ltd. for profit. They sell diesel, kerosene and cooking gas below the cost of production to help the government curb inflation for the nation’s 1.2 billion people.
Indian Oil shares rose 0.3 percent to 200.80 rupees at the close of trading in Mumbai. The stock has slumped 26 percent this year as the rupee fell to a record, increasing the company’s cost of importing crude oil. Indian Oil depends on overseas purchases for about 80 percent of its requirements.
The rupee dropped to an all-time low of 61.805 a dollar on Aug. 6 after the Reserve Bank of India last month cut its economic growth forecast for the year through March 2014 to 5.5 percent from 5.7 percent. It has depreciated 11.1 percent since the end of March, making it Asia’s worst performer.
Indian Oil received 42.6 billion rupees as subsidy from the government and 81.5 billion rupees from state-run oil producers in the quarter, according to the statement. It didn’t receive any compensation a year earlier, pushing it to the biggest quarterly net loss for any company in India.
Indian state-run oil refiners depend on government subsidies and discounts on purchases from state-run explorers Oil and Natural Gas and Oil India to make up for losses from selling fuel below cost. These payments are usually made every quarter. In case a subsidy decision is delayed, the payments are deferred.
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