IOC is the biggest Indian company by sales and now it also happens to be the Indian company with the biggest quarterly loss ever. IOC declared results today and said they had incurred a loss of Rs. 22,451 crores last quarter!
This is about $4 billion on today’s exchange rate, and is a much bigger loss than the one they had last year in this quarter at Rs. 3,719 crores. In fact, their forex loss alone is Rs. 3,187 crores which is close to their entire loss last quarter in 2011.
This is really bad news, but it’s not really news in the sense that IOC had said they were looking at massive losses when the petrol price was hiked by Rs. 7.50 in May. At that time, they said that all oil companies were looking at losses of Rs. 1,86,000 crores this year and this is expected to materialize as more oil companies declare their results in the coming days.
The primary reason for IOC’s losses is because they aren’t allowed to charge as much for petrol, diesel and LPG as it costs them, and rely on government grants for the shortfall.
They didn’t get any grants at all this quarter because the government has used up all the money for this year’s grants in last year’s grants.
IOC now warns that their borrowing limit will soon be reached and after that they won’t be able to borrow money to buy crude and that really does sound like an emergency.
This story again illustrates that no matter how much you dislike petrol price hikes, there is just no way to consume something without paying for it. If you don’t pay directly, you will pay indirectly, and it is becoming increasingly hard to see why diesel subsidies continue to remain so high when oil companies as well as the government are struggling so much with their finances.
Unfortunately, another indicator that the economic situation continues to worsen.