Bharat Petroleum Corporation has revived its plan of merging its subsidiary Kochi Refineries with itself in order to take advantage of high refining profit margins.

BPCL holds a 54.81 per cent stake in KRL, which operates a stand-alone refinery that processes 7.5 million metric tonne per annum (mmtpa) compared with BPCL's own refining capacities of 12 mmtpa in Mumbai.

Sarthak Behuria, chairman and managing director of BPCL, said: "We are re-examining the merger of KRL with BPCL, which we had kept on hold earlier."

However, he pointed out that there will be no change in the capital structure of Numaligarh Refinery. Behuria was briefing the media after BPCL's annual general meeting here on Monday.

Refining profit margins have been high with the widening of the spreads between crude oil and product prices.

While BPCL's gross refining margins (GRM) stood at $4.60 per barrel, KRL's average refining margins stood at $5 per barrel. Numaligarh Refinery, another BPCL group company, had a GRM of $ 4.10 per barrel last year.

KRL operates a stand-alone refinery that processes 150,000 barrels a day (7.5 million metric tonnes per annum). BPCL processes 180,000 barrels of crude a day.

S Radhakrishnan, director (marketing), at BPCL, told mediapersons, "We want KRL on our balance sheet. This will enable us to capture the refining margins. We can then compare ourselves with HPCL which has two refineries on their balance sheet. Our balance sheet will definitely look good with KRL".

Once the BPCL board approves the merger, it will hold talks with KRL shareholders to pick up the remaining equity in KRL. The Kerala government holds a five per cent stake in KRL.

Earlier, Behuria warned that the oil companies would not be able to sustain the current domestic prices with international prices "ballooning."

He pointed out that the price band which the oil companies are looking at corresponds to crude prices in a band of $37-$38 per barrel. However, the price of crude has already crossed that level to touch $45 per barrel .

"We will have to see whether the current prices are within the price band. If they breach the price band, the oil companies will have to go back to the government to either raise prices at the retail level or to lower the duties on the products," Behuria pointed out.

Oil companies have been given the flexibility to raise prices within a band which is the average of the price within the last three months and one year.

On account of subsidies on liquified petroleum gas (LPG) and superior kerosene oil (SKO), BPCL lost Rs 1,270 crore (Rs 12.70 billion) last year. Behuria claimed that BPCL received Rs 240 crore (Rs 2.40 billion) from ONGC as the latter shared a third of the subsidy burden.

On the refinery front, BPCL is re-examining the size, quality and demand-supply outlook relating to its Bina refinery in Madhya Pradesh. The corporation has appointed Engineers India Ltd to configure the processes, cost, and latest quality norms, Behuria added.