Indian Oil is about 3% of India's GDP, but the market cap is around Rs. 2 lakh crores against an asset base of Rs. 5.5 lakh crores. The oil marketing companies are not getting the valuation which they should get. Would you please give the market some confidence on the earnings aspect?
Thank you. I think you have given my answer itself that the four factors, crude is in our favor, refining margins are quite good, government has been quite supportive, overall ecosystem is quite supportive of the oil and gas sector today. So, I think, Sumeet, you have already given the positive news, what I wanted to give to the people. And I feel that, given the performance we had in Q2 and the other factors, what you mentioned, we should have a good profitability for this year.
First, an update on Project Sprint, especially with respect to the cost saving initiative. Can you give more granular details of where these cost savings have come and how we should think about the operating costs for FY '26 overall and '27? Second question is on the Panipat Refinery expansion progress and refinery throughput guidance.
Project Sprint is not only for the revenue expenditure, it is for the capital expenditure as well. What the target has been given is to reduce the cost by 20% of the budgeted numbers. But as on date, it will be difficult for me to share any specific number because this is an ongoing year. Maybe by 3rd Quarter end, we will be able to give you some specific figures. As far as Panipat is concerned, we are expecting that the refinery should come on commissioning by June '26. And the basic capacity is 10 MMTPA. In the first year, we should expect 60% of the installed capacity. Today, almost 90% physical progress we have already obtained. For FY '26-'27 throughput should be higher than 4 to 5 MMTPA above current installed capacity of around 72 MMTPA.
Questions are mostly related to the understanding of the LPG under-recoveries and the over-recoveries. LPG compensation will cover the losses till the end of FY '26 — is that correct? What is the expected LPG loss per cylinder going forward?
What we have been informed is that the government has given Rs. 30,000 crores under-recovery for the under-recoveries on LPG. We continue to get engaged with the government, and we will definitely pursue for the under-recoveries of the balance amount. Government will take a situation on a cumulative basis at the end of the financial year '25-'26, and then we will see what will be the situation. As for LPG loss per cylinder going forward, it won't be nil. It should be around Rs. 25 to Rs. 30. LPG is a controlled product — everything we have to submit to MOPNG. Based on our submission, they will take a decision.
On the lubricant division, can you give us the sales number for the entire first half? And on the CAPEX guidance front, in light of Project Sprint, would it be reasonable for us to assume that once you have realized the gains of Project Sprint, your CAPEX should actually come down by 20%?
Within the PSU segment, Indian Oil commands 48% market share. I will get the exact lubricant numbers emailed to you. As for CAPEX, there are two parts — big projects and maintenance CAPEX. What we are trying to do is maximize our CAPEX on the new investments but try to optimize on our existing CAPEX. Generally, we should be spending Rs. 30,000 crores to Rs. 40,000 crores going forward together, ourselves or with our JVs and subsidiaries.
When was the acrylic plant commissioned? Can you give the unit economics — CAPEX and expected revenue and EBITDA? Also on the LPG buffer account treatment — if Q3 generates over-recovery, will that come to P&L?
The acrylic plant was commissioned in the month of July. As far as the Oxo-alcoholic project is concerned, it has costed me Rs. 6,000 crores. Normally, if you see any project should give me a return of around 11%. Generally, the ramp-up is around 60% in the first year again. Regarding the LPG buffer — if positive comes, it will get adjusted against the past under-recoveries suffered by us. But it will not be taken in my P&L. If the over-recovery happens on overall basis, it will be shown as a payable.
On inventory loss, could you give the total loss number in the quarter? On Russian crude — does complying with sanctions mean you would be avoiding Russian crude completely?
In this Quarter 2, we had a gain on inventory. Quarter 1, we had a loss. On a cumulative basis, we still have an inventory loss. The exact number will be sent to you by email. On Russian crude — we are absolutely not going to discontinue as long as we are doing the compliance of the sanctions. Today, from Russia, Russian crude is not sanctioned. It is the entities and the shipping lines which have got sanctioned. Certificate of origin is a part of the standard documents being taken for the banking whenever you make the payments. We maintain all the data bank, and when we purchase, we ensure that we comply with all the international sanctions.
First was with respect to the LPG recognition. I believe the CFO mentioned that this will be recognized on an accrual basis in revenue. I just wanted to reconfirm that it will not be shown as other income, but it will be recognized as revenue. What is the loss per cylinder that we saw in Q2? And what is the loss per cylinder right now? How much is the LNG supply agreement with Trafigura?
Yes, the LPG compensation will be recognized as revenue, not other income. As on date, the loss is around Rs. 40 per cylinder. Q2, almost it was Rs. 100 per cylinder. Regarding Russian crude, in Q2, we have been maintaining somewhere around 18% to 19% in that range. Discount has been consistent over the past 5, 6 months at around $2 to $3 a barrel. The cracks of HSD has been quite good — HSD cracks were around 10 last year, which has been 14 this year. And the MS also, last year it was 4, now it is almost 6. Regarding Trafigura, the term is supply of approximately 0.4 MMTPA per annum of LNG from July 2025 onwards through December '29.
On the PetChem side, we haven't seen any material increase in PetChem margins per se, but you have been able to demonstrate a nice uptake and return to profitability at EBIT side. Can you also give us a breakup for your CAPEX plan for this year, including CAPEX towards renewables?
We had some units under shutdown last year, which are now working this year. PetChem margins still remain constrained. We earned more than Rs. 2,000 crores PetChem margin during the 6 months which was almost 25%, 33% higher than the last year. For CAPEX, refining would be almost Rs. 14,000 crores. Marketing and pipelines put together would be another Rs. 10,000 crores. PetChem should be around Rs. 2,500 crores. For renewables, we expect to contribute almost Rs. 2,000 crores in JVs and subsidiaries this year. Terra Clean itself has a target of 30 Gigawatt by 2030, commissioning 4 to 5 Gigawatt of power each year.
On accounting for LPG reimbursement — shouldn't it be accrued immediately since the payment schedule is known? And can you provide an update on Gujarat and Barauni refinery expansions similar to the Panipat update?
LPG is a controlled product, and we are guided by the communication received from the ministry. As of now, it has been conveyed to us that the income will be accrued to the company on a monthly basis. As of now, you can consider the amount in equal installment — Rs. 14,500 roughly divided by 12 monthly. As far as the expansion in Gujarat is concerned, that is also expected to come in the month of June '26. And Barauni expansion will start commissioning in stages with effect from August '26. In Gujarat refinery, we almost touch 84% physical progress, and in Barauni, 88%. Yes, 60% first year utilization is standard. As for PetChem projects, PX-PTA at Paradip Refinery is expected in 3rd Quarter of '26-'27. PBR plant at Panipat expected by June '26. PX-PTA physical progress is almost 90% now, PBR plant at Panipat is 70%.
You have approximately 2.4 million tons of medium-term LNG contracted. Will you use the LNG internally on your refineries or market it? Is there a strategy to use more gas internally?
We have both the portfolios. We use it internally also. We sell it to our customers also. So, we have a multiple source of buying, and we have a multiple source of selling our LNG. For optimization, the teams will always see whether it is more beneficial to sell or it is more beneficial to consume it internally. It all depends upon the alternate cost of fuel in the refining system.