To cut subsidy, make bulk users of diesel pay more: Kotak

Brokerage house Kotak Securities is of the view that charging bulk users a higher diesel price is easier to implement, than an across-the-board phased hike, as the government looks to cut fuel subsidies.
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney master your money IThe Winning Leap SME Special
Moneycontrol

Home » News » Markets » Market Edge

Jan 07, 2013, 10.32 AM | Source: Moneycontrol.com

To cut subsidy, make bulk users of diesel pay more: Kotak

Brokerage house Kotak Securities is of the view that charging bulk users a higher diesel price is easier to implement, than an across-the-board phased hike, as the government looks to cut fuel subsidies.

Like this story, share it with millions of investors on M3

To cut subsidy, make bulk users of diesel pay more: Kotak

Brokerage house Kotak Securities is of the view that charging bulk users a higher diesel price is easier to implement, than an across-the-board phased hike, as the government looks to cut fuel subsidies.

Post Your Comments

Share Cancel

Moneycontrol Bureau

Brokerage house Kotak Securities is of the view that charging bulk users a higher diesel price is easier to implement, than an across-the-board phased hike, as the government looks to cut fuel subsidies.

"We believe higher market-linked prices of diesel for the direct bulk consumers will be relatively easier to implement and may reduce the subsidies meaningfully. Nearly 18% of diesel is consumed by bulk customers including railways, state transport undertakings and private industrial companies, who do not deserve any subsidy, in our view," says the Kotak note.

Kotak strategists Sanjeev Prasad and team say the government’s proposal to increase cap on subsidized LPG cylinders per household per annum to nine from the current limit of six, is a retrograde step.

Also Read: View of UBS

"We expect the annual savings on LPG subsidies to reduce to 9% assuming the proposed cap of nine cylinders per household per annum versus 28% assuming current cap of six," says the Kotak note.

Yet, the government could reduce the impact on the subsidy bill by raising LPG prices even if the limit is raised to nine cylinders per household, write Prasad and team.

And while the proposal to hike fuel prices in a phased manner makes sense, the Kotak strategists say implementation would hold the key.

"If implemented, it may lead to meaningful savings on fuel subsidies. However, we will wait for actual implementation of the proposal before reviewing our earnings estimates for the oil PSUs. Even if implemented, we doubt that the Government will be able to raise prices after 3QCY13, given several state elections in 4QCY13 and general elections in 2QCY14," said the Kotak note.

Buy, Hold, Sell ? Hear it first on M3
To cut subsidy, make bulk users of diesel pay more: Kotak

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login