The government is likely to give a nod to hike kerosene prices by 0.25 paise a litre per month till April 2017. If this comes through then the upstream oil companies like ONGC, Oil India will benefit.
The government is likely to give a nod to hike kerosene prices by 0.25 paise a litre per month till April 2017, Economic Times today reported.
The move, if it comes through, is expected to benefit upstream oil companies like ONGC, Oil India, as the under-recovery on kerosene stands at around Rs 13.10 per litre, of which the government subsidises Rs 12.
The price hike -- the government last hiked prices on July 1 for the first time in five years -- will lower oil companies' subsidy burden.
According to CNBC-TV18’s Head of Research Varinder Bansal, a 25 paise hike would translate into a Rs 250 crore benefit for ONGC -- nearly 1 percent profit for the company.
Going forward, if according to some reports there is a progressive hike of kerosene then that will wipe out the entire kerosene subsidy for these companies. This could mean Rs 1,000 crore benefit to ONGC -- 4 percent profit on profits.
Meanwhile, there is also an expectation that these companies will be reporting good set of numbers on back of crude rallying over 30 percent from the lows.
These, says Bansal, are likely to give a fillip to shares of upstream companies.