Indian Oil Corporation (IOC) on Saturday reported a net loss of Rs. 3,388.39 crore in the first quarter ended 30th June 2010, on account of selling fuel below cost.

IOC, the nation’s largest oil firm, had posted a net profit of Rs.3,682.83 crore in the April-June quarter of the last fiscal, the company said in a statement.

The company accrued the losses as it was forced to sell petrol, diesel, domestic cooking gas LPG and kerosene below their actual cost and was not compensated by the government for it.

IOC lost Rs.11,013.85 crore in revenues in the April-June quarter. Of this, it got Rs.3,671.26 crore from upstream firms, Oil and Natural Gas Corporation (ONGC), GAIL India and Oil India.

“Consequent to non-revision of retail selling price in line with international prices, the company has suffered net under-realisation of Rs.7,342.59 crore on sale of petrol, diesel, PDS kerosene and domestic LPG,” it said.

The government, which in the previous year had issued bonds or paid cash for up to half of the revenue lost on selling fuel below cost, has so far not announced how it will make up for over Rs.20,000 crore under-recoveries of IOC, Bharat Petroleum and Hindustan Petroleum in the first quarter of 2010-11.

Upstream firms give discount on crude oil and LPG they sell to the retailers to make up for one-third of the revenues IOC, BPCL and HPCL lose on selling fuel below cost.

IOC said it made only $3 a barrel on processing of every barrel of crude oil in the April-June quarter as compared to $7.36 a barrel gross refining margin (GRM) in the corresponding period of the previous fiscal.

Net sales rose by 23 percent to Rs.71,275.07 crore in April-June. The refining margins were low mainly due to inventory losses as oil prices had come down compared to IOC’s closing stock on 1st April.

There were also negatives on account of exchange losses due to rupee depreciation and higher provisioning required for bonds.

IOC said it sold 17.254 million tonnes of petroleum products domestically in the first quarter as compared to 16.703 million tonnes a year ago while exports were almost unchanged at 1.058 million tonnes.

Its refineries processed 13.278 million tonnes of crude oil in April-June as compared to 12.466 million tonnes a year ago.