Of the several out-of-the-box innovations of Dhirubhai Ambani, the one that seems to have contributed so richly to Reliance Industries’ top line and bottom line appears its foray into refining.
For decades, the mindset was on building refining capacity to meet the growing domestic demand. The first 30 million tonne refinery at Jamnagar, the largest at that time, was conceived to meet this. Alongside, Reliance also aggressively set up hundreds of retail outlets with swanky exteriors. There were great expectations on the liberalisation of marketing petroleum products ushering a game changer biased towards the consumer. When the government continued with its old socialist prejudice and denied the private marketers – RIL, Essar and Shell – the benefit of subsidy, RIL boldly looked out for opportunities in the global market. It seized these quickly and invested more handsome amounts on doubling refining capacity at Jamnagar, which is presently around 65 million tonnes. RIL dedicated the entire produce for exports with fantastic gains for the country. In quick time petroleum product exports topped our export basket!
RIL’s consolidated financial results for 2015-16 showed a turnover at Rs 296,091 crore, a decline of 23.8 per cent due to fall in crude and product prices. But net profit increased by 17.2 per cent to Rs 27,630 crore (including Rs 423 crore of exceptional items).
Unlike most other exports, petroleum product exports seem to be quite profitable. The report on RIL’s performance mentions gross refining margins rising to a record $ 10.8 a barrel in the fourth quarter since 2007. Net profit was also a record Rs 7398 crore since 2007. These despite a drop in total revenue for the quarter by 8.9 per cent to Rs 64,569 crore. This could be understood in the context of the steep drop in crude prices and the consequent decline in price of petroleum products.
A matter for concern is the continuing fall in production of gas and oil from the KG Basin. The results reported a 35 per cent fall in revenue during the quarter due to lower prices and volumes.