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IOC Tops Fortune India 500 List, But Indian Oil Prices Are Still Highest In The World

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Fortune Magazine has just released their Top 500 Companies list for India, and as per the latest data, Indian Oil Corporation (IOC) has emerged as the biggest Indian company. Reliance Industries is at #2 followed by Bharat Petroleum which is at #3.

With annual revenue of Rs 5,00,973 crore, state run IOC has beaten Ambani led Reliance Industries which had annual revenue of Rs 4,44,021 crore.

Bharat Petroleum with Rs 2,67,718 crore revenue is at distant third meanwhile Hindustan Petroleum with Rs 2,36,797 crore is at #4.

The complete ranking is as follows:

1st: IOC (Indian Oil Corporation)

2nd: Reliance Industries

3rd: Bharat Petroleum

4th: Hindustan Petroleum

5th: Tata Motors

6th: State Bank of India

7th: ONGC

8th: Tata Steel

9th: Essar Oil

10th: Hindalco

As we can observe, out of ten, six companies are state-run while only 4 are private companies.

As per Fortune Magazine, the top 4 companies (which are all oil based) from India have retained their last year’s ranking. Overall, revenues of top 500 Indian companies have increased by 9.5% and profits have increased by 4.5%. Private companies have collectively increased their revenue by 10.2% whereas Government controlled companies have registered 6.6% increase in revenues.

Just for facts, 38% of all revenues made by top 500 companies is being controlled by Govt. companies.

Manufacturing continue to be the strongest and the most powerful niche among the top 500 Indian companies as 298 out of 500 companies are manufacturing, controlling 67% of the overall revenues. Services companies are making their presence more prominent as their count has increased to 143 and they collectively control 27.7% of overall revenues, compared to 26.3% in 2013.

The report observes, “Manufacturing then, definitely needs a helping hand and ‘Make in India’ could just be the ticket. The specific pain points that need to be addressed include the issue of retrospective taxation, labour and foreign direct investment”.

But Oil Prices Are Still High In India

Last year, IOC made revenues of Rs 4,20,287 crore, thereby increasing their percentage by 19% this year. Similarly, Reliance Industries had revenues of Rs 3,67,539 crore in 2013, which has increased by 20.8% this year.

This cements the fact that India’s top Oil companies are increasing their revenue, at a time when crude oil prices globally are coming down. If despite a stronger rupee against dollar, oil companies are increasing their profit, why the advantage is not being transferred to the end users?

As we can observe from this chart (source: LiveMint), the petrol prices in India are continuing to be highest in the world.

Rates

In the last 18 months, the prices of crude oil (raw) has come down by 23%, but the actual decrease in retail rates have only been 4%.

In this chart (source: LiveMint), we can see the price build up of Petrol in India, and observe how oil companies are making their money:

Price Build up

To understand better, here is a mark-up price comparison of oil as observed in price charges of different oil companies. Markup is the difference between the price of raw oil, as compared with the price which oil companies charge to dealers.

Despite low prices of raw oil, December saw a boost of 14.99% in the overall prices, which these companies are justifying as marketing expenditure, delivery and inland freight charges.

dealer price

Here is a possible scenario now, if oil companies continue to stick with their plans of increasing their profits (source:LiveMint):

possible price scenarios

As per the research done by LiveMint, even with 5.2% increase in markup (which is the global norm), retail prices should be lowered by Rs 6 compared to the current oil prices.

Considering that India’s biggest company is a state-run oil company, there should be a debate as to how much profit does a government run company decide to have, at the expense of its citizen’s well being.

[All graphs created by and copyright of LiveMint]

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