We have a CapEx of Rs 25,000 crore for the fiscal, says Sanjiv Singh, Chairman, IOC
We had a profit of around Rs16,800 crore this year and there was a significant improvement in terms of Q4toQ4, says Sanjiv Singh, Chairman, Indian Oil Corporation. Singh during an interview with Swati Khandelwal, Zee Business.
We had a profit of around Rs16,800 crore this year and there was a significant improvement in terms of Q4toQ4, says Sanjiv Singh, Chairman, Indian Oil Corporation. Singh during an interview with Swati Khandelwal, Zee Business, said Indian Oil along with its two Joint Ventures (JV) is functional in CGD and CNG segment in 40 geographical areas. Excerpts:
Q: Profit After Tax (PAT) saw a jump of over 15 times on Quarter on Quarter (QoQ) basis. What has led to this kind of performance?
A: This year on a yearly basis we had a total profit of around Rs16,800 crore. If we compare on a quarter on quarter (QoQ) basis then there was a significant improvement in terms of Q4toQ4 profit, which was predominantly because of higher inventory gain during this quarter four.
Q: Rupee appreciated in this quarter. Did it had any impact on the Forex front?
A: If seen on the yearly point of view, then we have lost close to Rs1,800 crores towards the exchange. But in the fourth quarter, we had some advantage over the previous fourth quarter, which was also nullified. If the rupee is seen in terms of dollars then volatility can be felt. This volatility led to price fluctuations, which had an impact on our profitability.
Q: Did the sanction on Iran and unrest in the Middle East had any impact on your supplies? Also, update us on your plan to source cheap crude from the US?
A: See, as far as Indian oil crude sources are concerned then Iran has been a major crude supplier for us. Last year, we bought about 9 million tonnes of crude from Iran. In fact, the absence of the total volume that Iran was exporting to India or to the global export market will have an impact on prices. At the same time, few other geopolitical factors like sanction on Venezuela, lower production from Nigeria and Libya, which are producing countries will have an impact on global crude supply as well as on the crude prices. But, saying that the US crude is cheap is not right because the term contract signed with any country mentions the quantity of crude, but the prices are based on the prevailing prices of the month when the crude is lifted. So, as far as volume of Iran’s crude is concerned then India and Indian Oil, both, have protected itself to make sure that the supplies are not hit but we will have to pay as per the global prices.
Q: Indian Oil has some big plans for the city gas distribution (CGD) business and has a CapEx of around Rs20,000 crore for the next 5-8 years for the purpose. Are CNG/PNG are going to be the future of cooking and auto fuel is concerned?
A: When it comes to CGD then we have a push towards infrastructure as well as the CG business. In fact, Indian Oil along with two Joint Venture (JV) is doing business in the CGD and CNG segment in 40 geographical areas. CNG is a cleaner fuel and is being pushed across the nation and its infrastructure like the gas pipeline is being created. Similarly, we have worked aggressively in other fuel including LPG and have almost 94 per cent domestic penetration in the segment. So, when it comes to domestic fuel than we are going to provide a cleaner fuel option in the form of LPG and PNG to the nation. In the case of transportation fuel, we are providing a viable option in the form of diesel, gasoline and CNG.
Q: Update us on your refining capacity expansion plans?
A: When it comes to refining plans then BSVI projects are going on in our refineries and they will be completed in this financial year and those projects will be commissioned by the end of this calendar year. Apart from this, we also have capacity expansion plans in which few petrochemical units will be expanded while few new units will also be created. Interestingly, these plans are in implementation stage in different refineries. If we talk about CapEx on corporation level than we have a CapEx of Rs25,000 crore in this fiscal.
Q: Let’s talk hypothetically about what will happen with the economy, financials and strategy if crude prices cross $100/barrel levels obviously the under-recoveries will come into the picture?
A: As far as the company is related than our product prices are linked with international product prices today. So, if crude is priced at $100/barrel, hypothetically, then product prices will also move up in the same manner in the global market and it will happen at our end. The negative impact that the company will face will come in the form of higher working capital requirement and interest burden. Interestingly, 9-10 per cent crude processed at our place is consumed in the form of internal energy. So, crude bought at higher levels will have an impact on internal energy. So, these are two major negative impacts that high prices of crude bring along with itself. Secondly, total borrowing for all the users including the OMCs also goes up. When it comes to the basic economics of the company then natural hedging is always available with it due to the product prices.
Q: Will auto companies decision to wind-up the diesel engines will have any impact on sales mix?
A: See, if we look towards the transport sector then we will find that India’s transport sector is diesel driven, in which maximum diesel is consumed by the heavy vehicles, not in cars. Secondly, the BSVI vehicles available in the market needs after engine devices to meet the BSVI emission standards, which is a costly affair and that is why the auto manufacturers are taking their call and have started focusing on a different segment. Where they should focus on is their own call. However, bulk diesel is consumed by heavy vehicles. And, I can’t see any viable alternative of diesel in the near future, however, gas is an alternative, and it will supplement diesel.