INDIA’S largest public sector standalone refinery MRPL reported a 58% fall in net profit to Rs 253 crore for the March 2010 quarter on weaker gross refining margins (GRM), stronger rupee and lower refinery throughput. MRPL’s gross refining margin — the differential between sale proceeds of refined products and the cost of crude oil required to produce it — narrowed by 30% to $5.25 per barrel from $7.54 in March ’09 quarter.
A stronger rupee trading at 45.6 against the US dollar meant that the GRM in rupee terms was even lower. For the March ’10 quarter the GRM stood at Rs 240 per barrel — 38% lower as against Rs 390 year ago, when a US dollar was worth Rs 51.45.
MRPL also had to take a partial shutdown for over 45 days to revamp gasoil desulpherisation unit to meet Euro III and IV norms for the diesel production. This brought down the refinery’s throughput 10.5% to 3.06 million tonne during the quarter. The refinery can now produce 5200 tonne of diesel per day of these higher specifications. These three factors greatly eroded the company’s profitability. However, forex gains worth Rs 166.7 crore during the quarter as against forex loss of Rs 188.53 crore in the March ’09 quarter supported the profits. Other income for the quarter also rose by 36%, while staff costs came down 35.7% as the finalised salary revisions were adjusted against provisions made earlier. The company continues with its refinery expansion project that will take its rated capacity to 15 mtpa from present 9.69. This Rs 12,400-crore project is scheduled to complete by October 2011. The refinery’s operating level remained beyond 12.5 MTPA for last four years, which will go up even further post this expansion. The project will also enhance its ability to produce better quality fuels even from worse quality crude oil.
As part of this expansion, the company is also setting up a 450,000 TPA polypropylene unit at a capital cost of Rs 1800 crore. The company has received Rs 5,000 crore of loan from ONGC and Rs 200 crore from Oil Industry Development Board at discounted interest rate. While in the near future the recent Euro III/IV upgradation is set to earn it slightly better margins, MRPL’s profitability will largely depend on the trends in the GRMs globally. The ongoing refinery expansion project, which is still 18 months away from completion, will provide it a great booster as volumes as well as margins widen.
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