MOSCOW (MRC) -- State-owned gas utility GAIL India Ltd on Wednesday reported a 170 per cent jump in its fourth-quarter net profit, as lower corporate tax rate offset lower petrochemical and natural gas prices, said Chemweek.
Net profit in January-March 2020 at Rs 3,018.20 crore, or Rs 6.69 per share, was 169 per cent higher than Rs 1,122.23 crore, or Rs 2.49 a share, net profit in the corresponding quarter a year ago, GAIL Chairman and Managing Director Manoj Jain told reporters here.
Jain said the company opted for lower corporate tax rates offered by the government to firms willing to forego exemptions. The lower tax rate offset a dip in petrochemical, liquid hydrocarbon and natural gas prices. Besides, leading to a dip in energy prices, the outbreak of the coronavirus pandemic and the ensuing lockdown to contain its spread also evaporated demand after industries shut down.
Jain said natural gas demand fell by up to 30 per cent in April as industries shut down and city gas operations comprising of mainly CNG sales saw a slump with vehicles going off road. The demand has since returned to near normal after lifting of the restrictions. "Except for CNG, we are near normal," he said adding that pre-COVID-19 levels for CNG sales are expected in two months.
The fall in domestic demand led to the company asking both domestic producers as well as its overseas LNG suppliers to reschedule supply of some of the gas volumes. In 2019-20, the company imported 74 cargoes or shiploads of liquefied natural gas (LNG) - 44 from US, 3 from Qatar, 15 from Gazprom of Russia and 12 from spot or current market.
As many as 56 cargoes of the LNG contracted from the US were sold in overseas market in the financial year ended March 2020. In 2020-21, it has scheduled 49 of US cargoes to come to India and sold 28 of them in the overseas market. Another 8-9 cargoes are left untied, he said.
Considering the slump in demand in the first quarter, GAIL may end up cutting down on spot volumes. Jain said the company had a capita expenditure (capex) spending of Rs 6,114 crore in 2019-20, mostly in laying of pipelines.
In the current financial year 2020-21, it plans to maintain a capex spend of Rs 4,000-5,000 crore, he said adding that there is no review of the spending in view of COVID-19 as most of the expenditure is in ongoing committed projects of laying gas pipeline grid.
Jain said the company has decided to opt for the tax dispute resolution scheme, the Vivad se Vishwas Scheme 2020, in respect of 44 number of income tax cases, involving 21 assessment year 1996-97 to 2016-17 having an estimated financial implication of Rs 2,157.34 crore.
"On settlement of these cases, in terms of the scheme, there would be an income tax liability of approximately Rs 1,183.15 crore and accordingly, after considering the existing provision of Rs 265.59 crore already made in the previous years, additional provision of Rs 917.56 crore has been made towards tax expenses during the financial year 2019-20," he said.
For the full financial year 2019-20, GAIL recorded a 10 per cent rise in its net profit to Rs 6,621 crore as the company opted for lower corporte tax rate. The turnover for the year stood at Rs 71,730 crore as against Rs 74,808 crore in the last fiscal year. "The increase in PAT (profit after tax) is mainly due to adoption of the lower tax regime," he said.
He said although there were some reductions in GAIL's business activities in initial stage due to the country-wide lockdown, with graded relaxation in lockdown and other measures by the Government of India to resume economic activities, the operations of the company has been normalised to a great extent.
The petrochemical plant, which had taken a shutdown in April 2020, is now operating at full capacity. The liquid hydrocarbon (LHC) production and transmission segments did not see much impact and are currently operating at 100 per cent of FY20 levels, he added.
As MRC informed earlier, GAIL India Ltd has restarted its polyethylene (PE) unit in Pata, Uttar Pradesh. Thus, the company's 400,000 tons/year high density polyethylene (HDPE)/linear low density polyethylene (LLDPE)swing plant in Pata, Uttar Pradesh resumed operations just a couple of days after the company shut down the unit on 25 September 2020 due to feedstock supply disruption.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).