Oil Min may seek gas price hike; ONGC, Oil India to gain

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The Oil Ministry has cleared a proposal to hike the regulated price of gas sold by state-owned duo of Oil India and ONGC, say NewsWire18 sources. Sources say the Oil Ministry is seeking a 31% increase in the gas price to USD 2.7 per million British thermal units (mBtu) (or Rs 4.2 per cubic metre) from the current price of USD 2.1 per mBtu (Rs 3.5 per cu m), sources say, adding that the ministry is seeking the view of other ministries on the issue.

Sources say that the gas price may be hiked retrospectively with effect from April 1, 2009, and that the Cabinet may take up the issue of hike soon.

ONGC and Oil India, which stand to benefit as their profits may increase due to the hike, said they were awaiting an official announcement on the matter.

More margins for ONGC, Oil India

If the regulated price of gas was upped by 31%, it would translate into a revenue gain of Rs 2,000 crore for ONGC annually, its chairman RS Sharma told CNBC-TV18, adding that it would bring the company out of negative margins.

"However, let us wait for the final approval. This is still at the proposal stage. After the Oil Ministry clears the proposal, it will go to the Cabinet for approval. I am keeping the fingers crossed," Sharma said.

TK Anant Kumar, CFO of Oil India, said even though he had not heard from the government recently, he was expecting a 31% increase in gas price and that would improve the company's profitability.

If the announcement came through it would improve ONGC's earnings per share (EPS) by Rs 6-6.5, resulting in an upgrade target of Rs 70-80 for the company's stock, said Deepak Pareek of Angel Broking.

Amit Rustagi of Antique Stock Broking said the policy announcement would increase Oil India's EPS by Rs 4.5 and would increase its bottom-line significantly.

To view the complete interviews of RS Sharma, TK Anant Kumar, Amit Rustagi and Deepak Pareek, please watch the attached videos.