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The total operating income of Hindustan Petroleum Corp (HPCL) rose 11 per cent during October-December 2012 period to Rs 53,424 crore.
However, the profit of the state-run refiner declined sharply to Rs 147 crore, from Rs 2,725.18 crore in the year-ago period because of a spike in costs and lower compensation from government for under-recoveries.
The firm witnessed 18 per cent rise in total costs to Rs 52,858 crore for the quarter. High crude oil prices, ageing facilities and weakness in the rupee have been squeezing gross refining margins (GRM) at state oil refiners.
During the quarter, HPCL received compensation of Rs 5,538 crore from the government to help cover under-recoveries, while discounts on crude oil purchased from upstream oil companies amounted to Rs 2,715 crore.
State-run refiners, such as HPCL, Bharat Petroleum and IOC, have a lower capacity to process cheaper heavy crude than private players Reliance Industries and Essar Oil, which recently reported healthy Q3 margins.
During Apr-Dec 2012, HPCL averaged a GRM of $1.46, translating to a GRM of $3.19 in the quarter. In contrast, RIL reported a GRM of $9.60, while Essar Oil's GRM came in at $9.75. HPCL is looking to expand its Mumbai and Vishakapatnam refineries, and increase their complexity, in order to help improve margins. It also has plans to set up a new refinery project in Ratnagiri, Maharashtra.