Business Business: After recording record profits, state-owned oil companies Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) saw their profits fall by 90% in the April-June period. The main reason for the decline in profits was the sale of LPG at a price below cost. The net profit of the country’s largest oil company IOC fell 81 percent on a standalone basis in the April-June period. Revenue in the first quarter of the current financial year stood at Rs 2,643.18 crore, while the profit in the same period last year was Rs 13,750.44 crore. The company’s profit also decreases seasonally. In the previous January-March period, the company’s profit was Rs 11,570.82 crore. HPCL’s quarterly profit fell 90% to Rs 633.94 crore. Market experts say that the impact of the decline in profits of oil companies is also visible on their share prices. Stocks may fall.
BPCL’s net profit stood at Rs 2,841.55 crore in the April-June period, down from Rs 10,644.30 crore in the same period last year and Rs 4,789.57 crore in the January-March period. All three fuel retailers made big profits last year as gasoline and diesel prices remained stable despite cost cuts. These companies argued that they would have made losses without raising prices despite the cost increase last year. However, the benefit of price consolidation ended as petrol and diesel prices fell by Rs 2 per liter ahead of the general elections. Moreover, the three oil companies do not get any subsidy for selling LPG at a price below cost.
According to information submitted by these companies to the stock exchanges, during April-June IOC sold LPG at a price below cost, leading to a profit of Rs 5156.23 crore for BPCL, Rs 2015.10 crore for BPCL and Rs 2443.71 crore for HPCL. As per the Petroleum Ministry rule, if the Market Determined Price (MDP) of an LPG cylinder is less than the Effective Customer Cost Price (ECC), then the oil marketing companies (OMCs) have to keep the difference in a separate account. This should be saved in a buffer account for future adjustments. The three major oil companies IOC, BPCL and HPCL earned a profit of about Rs 81,000 crore in 2023-24.
