During FY12, IOC got Rs45,484 crore subsidy from the government to make up for most of the revenue it lost on selling diesel, domestic LPG and kerosene below cost
Mumbai: State-owned Indian Oil Corp (IOC) on Monday reported a more than trebling of net profit in the March quarter after the government compensated the nation's biggest refiner for selling diesel and cooking fuels below cost, reports PTI.
IOC's net profit rose to Rs12,670.43 crore in the January-March quarter from Rs3,905.16 crore a year earlier, the company said in filing to the stock exchanges.
IOC said it got Rs45,484 crore subsidy from the government to make up for most of the revenue it lost on selling diesel, domestic cooking gas (LPG) and kerosene below cost during the 2011-12 fiscal.
The company, as also Bharat Petroleum and Hindustan Petroleum, sell these fuels at government controlled rates to keep inflation under check.
After the compensation, the company had to absorb just Rs22.37 crore loss on the four fuel.
It earned $4.25 on turning every barrel of crude oil into fuel in the fourth quarter ended March 2012, as opposed to $7.56 a barrel gross refining margin a year ago.
In the full fiscal, GRMs stood at $3.63 per barrel compared to $5.72 a barrel in 2010-11 fiscal.
The company declared a full year dividend of Rs5 per share.
IOC also reported a forex loss of Rs2,769 crore in FY12 while its exceptional loss was of Rs1,540 crore on account of entry tax. Its sales rose 30% to Rs128,433.96 crore from Rs98,482.45 crore.
The net profit in 2011-12 fiscal at Rs3,954.62 crore was down from Rs7,445.48 crore in the previous year.
Petroleum companies should tell the public how they are going to improve efficiency and bring down costs instead of weeping about under-recoveries, and the governments should reduce their expenditure through greater efficiency. As Indira Gandhi said in 1970, austerity is the only way to go
It was soon after the first oil shock over 40 years ago, Indira Gandhi, who was prime minister, called upon the nation to use a lot less petrol and diesel and kerosene because the crude price had jumped five times or more. Austerity, she thundered, was the only way for the country to go.
A few days later she set up a stunt to show that she would lead by example. Instead of using her usual white Ambassador car, she went from her Safdarjung Road residence to Parliament House in a horse-drawn carriage which the president used on ceremonial occasions. And as her vehicle clip-clopped along, Indira, the master of showmanship did not look this way or that but buried her head in official files. All the newspapers carried huge, front page pictures.
The next day, Atal Behari Vajpayee, master at the art of puncturing opponents’ egos, produced his own version of austerity. He came to the Lok Sabha on a cart pulled by two bullocks. Vajpayee drove the cart himself, wearing a thin towel tied round his head, a whip in hand and clicking his tongue in classical style. Again, huge pictures on all front pages and a good laugh resounded around the country.
The next day Piloo Mody topped Indira and Vajpayee. Joint founder of the Swatantra Party, Mody was podgy and tall and must have topped the scales at 120 kilos. He came to the Lok Sabha—you must have guessed it—on a caparisoned elephant, howdah and all. Nationwide laughter once more and Indira’s petroleum austerity campaign lay down and expired with a whimper.
But now, austerity and efficiency in using petroleum products have become vital. India has been galloping well in the growth Derby: We cannot allow the champion horse to fall down and break a leg.
One fact has become clear. Consumption of petrol will continue to increase every year even if the fuel costs Rs100 a litre. And the same is true of petroleum products. Basic economic theory says that this should not happen: when the price goes up, demand should come down. But there is too much of money circulating in the economy. People will spend the extra money needed on petrol since they have to get to work and come back home. The public transport system is in a precarious condition. Put more pressure and it will break down. Cars and two wheelers are the only fairly comfortable means of commuting.
Therefore a strong campaign of austerity and efficiency is essential. Petroleum companies should tell the public how they are going to improve efficiency and bring down costs instead of weeping all the time about under-recoveries. And the governments should reduce their expenditure through greater efficiency and less leakages; they will then be able to reduce taxes on petroleum products and thus keep a lid on prices.
The Petroleum Conservation and Research Association of India (PCRA) keeps coming out with simple ways of reducing consumption. Here are some dealing with personal transport...
Delhi alone burns petrol/diesel worth Rs994 crore per annum at traffic red lights. Switch off your engine if you are going to spend more than 15 seconds at traffic red lights.
Drive your car at 45 kmph and save petrol up to 15% against driving at 65 kmph. If you drive at 80 kmph you burn 30% more petrol. Correct tyre pressure can save up to 10% fuel. Maximize the use of 5th gear. Driving in the correct gear prevents a 20% increase in fuel use. Regular engine tuning saves 6%. Clean your air filter regularly. Avoid frequent use of brakes.
There are other tips. Create car pools. Take a longer but less congested route. You burn 20% more fuel when using the air conditioner. Use the recommended grade of engine oil.
As Indira Gandhi said in 1970, austerity is the only way to go.
(R Vijayaraghavan has been a professional journalist for more than four decades, specialising in finance, business and politics. He conceived and helped to launch Business Line, the financial daily of The Hindu group. He can be contacted at [email protected].)
Security is tighter but only in the top-end hotels. That apart, a lot of processes are followed to meet just regulatory norms
Hotel security in India is much tighter today. A visit to the Taj Mahal Hotel will make you aware that the hotel has become a fortress. The 26/11 terrorist attack when 166 people were killed in the twin attacks on the Taj Mahal Hotel and Trident Oberoi in Mumbai, have changed the perception of the hospitality sector regarding their vulnerability to such attacks and security incidents. I was recently staying at Hotel Keys in Thiruvananthapuram and was impressed by the security arrangements in the hotel. The instructions about fire safety were cogent and practical particularly the suggestion to crawl at the time of fire to avoid getting suffocated from smoke. Renjith Rajendranath, the Guest Service Manager-Front Office admitted that the 26/11 incident did push them to look more carefully at the security aspects in the design. The hotel came up after the incident.
However, Percival Edward, a security expert based in Bangalore, says that the actions taken by the hospitality sector post 26/11 were more of knee-jerk reactions. Installing security surveillance systems is not enough. Installing effective security surveillance systems coupled with creating awareness among the hotel staff by way of intensive training is what is needed. Another security expert Sathiya Seelan says that some of the hotels try to cut corners by installing fewer cameras than what is required. Much less attention is paid towards minor details like position of the cameras, the capturing and storage of images, training, retrieval of images, capturing moving objects with excellent precision and installing cameras in common areas like lobbies, reception, etc.
Though both Taj and Oberoi Trident have taken stringent measures to restore their premises and beef up the security, the same cannot be said about the others in the hospitality sector in India. Fire safety and security surveillance must go beyond the need to ‘comply’ and get a “No-objection” certificate from the fire department or the municipal authorities.
Worse is the fact that hospitality sector does not believe in regular annual maintenance contracts with the service providers. Says Chetan Nagappa who works for a security organization, “At the end of the day everything boils down to cost. The hotel authorities will remember the service providers only when there is a problem; when it comes to safety and security their primary intent is to save costs.”
A management trainee who briefly worked in a famous three-star hotel in Mumbai spoke to me on the condition of anonymity. She says, “It always surprises me that the hospitality sector spares no expense when it comes to providing world-class interiors with a terrific aesthetic sense; but when it comes to safety/security related issues, they believe that nothing will happen to them or their premises and so any money spent on security surveillance is considered an added burden.”
The hospitality sector should look at the consequences in the aftermath of an accident. How will it impact their brand? How long will it take to rebuild the hotel in case of property damage? Global insurance companies do talk about resilience—the ability to bring back a damaged property back to shape, but in India, the insurance companies seem to be more concerned about losses and claims. Our question is why not look at prevention through robust risk management and prudent underwriting norms?
The situation in some of the lesser known second-rung hotels is even more alarming. It doesn’t help that there is not a single designated authority to conduct periodic checks or audits. One is not sure if hotels have a disaster response plan in place.
Nagesh, a security expert based in Bangalore, feels that there are very few people who have realized the need to make their properties fail safe or security safe. He agrees that there are limitations that the hospitality sector faces in terms of fool-proof security measures. Security has always been on top of the agenda in five star hotels and high-end hotels, but the 26/11 incident has made them realize the importance of maintenance.
Nagesh regrets that other than these top-end hotels, the efforts of the mid-range and lower range hotels in the hospitality sector to improve the security measures are inadequate. Windsor Manor hotel in Bangalore refurbished their security surveillance post the 26/11 incident. He says that earlier hotels neglected maintenance but after 26/11 they have realized that maintenance is important too.
According to Nagesh, the mid-range and lower-end hotels install CCTVs only to comply with regulatory norms. He even adds that most of the five-star hotels are not aware of what they exactly need. So, the thinking of the hospitality sector has to change. The thinking should not be restricted to looking at the criteria required or meeting the norms. The need to install security systems under pressure from fire department or legal cell should be replaced with the need to enhance security surveillance to take care of their employees, guests, their properties and also the surrounding properties. The buildings adjacent to such hotels are also subject to collateral risks. This cannot be ignored.