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Should OMCs expect timely subsidy from govt in 2013

Oil marketing companies (OMCs) continue to take a hit on sale of petroleum products due to delay in government subsidy.

January 01, 2013 / 11:20 AM IST
 
 
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Moneycontrol Bureau


Oil marketing companies (OMCs) continue to take a hit on sale of petroleum products due to delay in government subsidy.  Currently, Bharat Petroleum, Hindustan Petroleum and Indian Oil Corp lose around Rs 12 per litre on diesel, Rs 34 on kerosene sold through public distribution system (PDS) and Rs. 468.50 per 14.2 kg cylinder of domestic cooking gas due to government dictated rates.


According to rough estimates, oil marketers are likely to lose around Rs 150,000 crore in FY13 due to sale of petroleum products at government controlled prices.


However, going by past trends, investors can expect OMCs to get a hefty share of the subsidy at the start of 2012, say analysts.


Despite downstream companies facing fundamental problem of delayed payment by the government, BPCL has been one of the best performing stocks amongst its peers on account of successful upstream activities. It has outperformed Hindustan Petroleum and Indian Oil Corp in IHFY13 due to superior gross refining margins (GRMs) which was USD 4.6/bbl when compared with HPCL's USD 1.2/bbl and IOC's USD 1.2/bbl.


Meanwhile, all three companies, though hard-pressed due to abnormally high borrowings and lower profits, are lining up sizeable investments to increase refining capacity and other value-added segments like petrochemicals in 2013.

 

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