BENGALURU: Indian Oil Corp has reduced crude processing to average at 84% of overall capacity from 96% in April as a devastating second wave of COVID-19 dented fuel demand, the chairman of the country's biggest refiner said on Wednesday.

Domestic sales of gasoil and gasoline by Indian state refiners plunged by a fifth in the first half of May from a month earlier, preliminary data showed on Monday, as lockdowns to curb COVID-19 cases hit industrial activities and consumption.

"Demand destruction is there, which has also reflected in refinery runs... When it (fuel demand) will return to normalcy is a very difficult question to answer," Chairman SM Vaidya said, pinning recovery hopes on the country's vaccination drive against the pandemic.

The company, along with subsidiary Chennai Petroleum , controls about a third of India's 5 million-barrels-per-day (bpd) refining capacity.

In May last year, the state-owned refiner was operating its plants at an average 67%, Vaidya said.

Still, a surge in crude prices boosted inventory gains and gross refined margins (GRMs) at IOC, helping it report a net profit of 87.81 billion Indian rupees ($1.20 billion) for the quarter ended March 31, against a loss of 51.85 billion rupees a year ago.

Analysts were expecting a profit of 55.06 billion rupees, according to Refinitiv IBES data.

IOC's GRM - the difference between the cost of crude oil processed and the selling price of refined products - was $10.60 per barrel against minus $9.64 a year ago.