IOC expects subsidy letter in 15-20 days

State-owned oil retailer Indian Oil Corporation (IOC), which raised petrol prices by 28 paise per litre effective Tuesday, will review the prices after 15-20 days, BM Bansal, chairman and director - planning & business development, said after the company’s 51st annual general meeting.

Prices will move up or down depending on the prevailing global prices, he said.

The company hopes to receive the letter stating the amount of subsidy towards revenue losses sustained on sale of auto and cooking fuel over the last six months in the next 15-20 days.

For the first six months of this fiscal, IOC’s gross under recovery is around Rs11,000 crore. Revenue loss during the second quarter alone is around Rs6,000 crore, Bansal said, adding, after adjusting for upstream subsidy of Rs2,000 crore, the loss for the quarter works out to Rs4,000 crore.

The under recovery on diesel is at Rs1.75-2 per litre. “Under recovery in petrol is officially over but some continuing will happen till next year,” said Bansal.
“We are expecting the gross under-recovery for the industry to be at Rs53,000 crore, plus or minus Rs3,000 crore,” S V Narasimhan, director finance, IOC said.

IOC has earmarked Rs30,000 crore towards capital expenditure during this year, up from Rs12,256 crore for the last.

It plans to invest a whopping Rs47,000 crore on new and existing projects, Bansal said, without giving give any timeframe.

The company is seeking shareholder approval in the next 10 days for its follow-on public offer of up to 242.79 million shares of Rs10 each, amounting to 10% of the paid-up capital.

It also plans to raise external commercial borrowing of up to $500 million, Bansal said.

Among its various projects, the company plans to increase refining capacity up to 80.7 mtpa by 2012.

It currently has a refining capacity of 61.7 mtpa, including Chennai Petroleum Corporation Ltd and a refinery each in Chennai and Narimanam, with gross refining margins of around $5 per barrel.

“CPCL is planning to put around 9 mtpa capacity and studies are being done,” Bansal said.

Work on a detailed feasibility report for its LNG terminal is in progress. The report would be completed by end-October and the financial approval is likely by January, said Bansal.
The refiner is also undertaking a pilot project for transparent polymeral cylinders, which would cost Rs 3,000 apiece, the officials said.

In the renewable energy segment, IOC is setting up a joint venture with the Nuclear Power Corporation of India Ltd. The two PSUs have already signed the MoU and IOC will have 26% equity stake in the venture with an investment of Rs961 crore.

The project will come up in Kota, Rajasthan with a capacity of 1400 mw. Though IOC will not bring in any equipment for the project, it will have a member on the board of the company.

“We have the option of increasing the stake to 49% in future. The total project cost is Rs12,000 crore, which will be put up in the next 5 years. The work has already started and in the next one month, a formal JV will be formed,” said Bansal.

The company plans to raise its wind power capacity too. It currently has a 21mw wind power project with a power load factor of 23-24% and is looking for a site to be able to raise this capacity to 100 mw in the next few years, said Bansal.