IOC reports massive loss of `5,185 cr in March quarter on inventory losses

NEW DELHI: State-owned Indian Oil Corp (IOC) on Wednesday reported a massive Rs 5,185 crore loss in the March quarter after a slump in oil prices resulted in record inventory losses for the company. The net loss of Rs 5,185.32 crore in January-march compared to Rs 6,099.27 crore net profit in the same period a year back, IOC Chairman Sanjiv Singh told reporters here.

The loss was primarily due to inventory losses and lower refining margins.

The company recorded an inventory loss of Rs 14,692 crore in the fourth quarter of 2019-20 as compared to an inventory gain of Rs 1,787 crore in the same period a year back, he said. An inventory loss is recorded when a company buys raw material at a particular price but by the time it is shipped and processed into fuel, rates have fallen. Since retail prices are benchmarked to prevailing international prices, an inventory loss is recorded. In case of reverse, an inventory gain is booked.

The company, which had earned $4.09 on turning every barrel of crude oil into fuel in January-march 2019, posted a negative gross refining margin of $9.64 per barrel. After excluding inventory losses/gain, the GRM for Q4 FY20 was $2.15. Singh said fuel demand, which had evaporated by as much as 70 per cent following the coronavirus lockdown grounding most land and air transport, has returned to 80-85 per cent and is likely to reach 90 per cent by the month-end or in the first half of July.

Petrol demand has risen unexpectedly possibly because most public transport is still off roads and private vehicles are being used for commuting.

Diesel demand is also picking up on increased rural activity and goods transportation. However, the demand may reach full PRE-COVID levels only by the end of the year when industrial and aviation demand picks up, he said.

Airlines were grounded in mid-march and only have only partially resumed operations. Singh said net profit in 201920 fiscal too fell to Rs 1,313