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The high fuel price of 2008 are now being to be reflected in the
financial reporting of state oil companies involved in the downstream
sector.
State oil companies include Indian Oil Corporation (IOC), Bharat
Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL)
who have seen a sharp increase in the debt-equity ratio during
the first three quarters of the current year (runs from april April
2008 to March 2009) as they increased borrowing to fund record
under-recoveries.
The debt-equity ratio for HPCL for instance increased almost three-fold
to 4.64:1 as on December 31, from 1.59:1 as on April 1, 2008, as oil
prices touched a record high of $142 a barrel in july 2008 before
declining to double digit levels. As on December 2008, borrowings for
the three companies together stood at Rs 107,165 crore. A high
debt-equity ratio also implies a high interest expense.
The interest liability of OMCs is projected at Rs 7,484 crore for the
whole fiscal as against Rs 2,925 crore in the previous year.
Under-recoveries for the year are estimated to be a little over Rs
100,000 crore for the three companies, which have accumulated losses of
Rs 11,094 crore during the nine-month period.
“The OMCs are estimated to close the financial year 2008-09 with
under-recoveries of Rs 103,908 crore,” Petroleum Minister Murli Deora
informed the Parliamentary Committee, which met on February 17. Of
this, Rs 60, 967 crore has been compensated by the issue of bonds,
while another Rs 32,000 crore has been absorbed by the upstream
companies.
The average price for Indian basket of crude during the April-January
period stood at $91.42 a barrel vis a vis $79.25 for the whole of
2007-08. The erosion in net worth during the first nine months was 43
per cent for HPCL, 25 per cent for BPCL, and 9 per cent for IOC. The
under-recoveries have resulted in weak cash flows, thus compelling them
to borrow heavily from the market.
“The high debt-equity ratio was due to the losses we incurred in the
form of under-recoveries and we had to borrow heavily. However, the
situation is improving now and the picture at the close of this fiscal
should be different,” said B Mukherjee, director (Finance), HPCL.
Finance officials at IOC and BPCL reiterated Mukherjee’s view and hoped
the situation to change with the issue of oil bonds.
PetrolWorld 210209
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