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Our Bureau

New Delhi , July 21

BHARAT Petroleum Corporation Ltd (BPCL) and IBP Ltd are set to slip into the red in the first quarter of the current fiscal 2004-05 owing to the burden imposed by sale of LPG and kerosene at below cost price on the tacit direction of the Government.

This was conveyed by the chief executives of BPCL and IBP to the Petroleum Secretary, Mr S.C. Tripathi, in a meeting held on Wednesday.

While BPCL is likely to post a net loss of around Rs 28-32 crore, IBP Ltd is likely to witness a higher net loss of around Rs 40 crore. The public sector oil marketing companies Indian Oil Corporation (IOC), BPCL, Hindustan Petroleum Corporation Ltd and IBP Ltd have suffered an under-recovery of around Rs 5,000 crore during April-June.

At the meeting, IOC said that it could post a profit of around Rs 1,300 crore this quarter while HPCL said that it could record a profit of roughly Rs 90 crore.

The meeting was convened by the Government to examine the option of directing Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd to share the burden borne by the oil marketing companies on account of sale of LPG and kerosene at non-remunerative prices.

This option was exercised last year resulting in ONGC bearing a hefty Rs 2,670-crore burden.

ONGC has been protesting that such a move is unjust since it too is losing money in the natural gas business where it is selling gas at $1.10 per million British thermal units on the directions of the Government.

At the end of the meeting, no decision was arrived at and the Petroleum Secretary decided to take up the matter with the Petroleum Minister.

Under-priced sale of LPG and kerosene in an environment of high global product prices has been accentuated by the fact that the Government has lowered the subsidy allocation this fiscal.

Further, companies such as BPCL and IBP Ltd are the worst hit since BPCL has the least refining capacity amongst the integrated refining and marketing companies like IOC and HPCL while IBP Ltd has no refining capacity.

IOC, on the other hand, has the highest refining capacity. In the current market scenario of high refining margins, the refinery business moderately compensates for the losses incurred in the marketing business.

In the case of BPCL, the financial performance is further dented by the expenses incurred in the VRS scheme (Rs 50 crore) besides another Rs 50 crore towards accelerated depreciation of LPG cylinders.

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