Retail prices of kerosene have been increased by 25 paise per litre as of now and J Ramaswamy, Director Finance of HPCL is hopeful the government will take the right pricing action in future as well.
Sudarshan Sukhani of s2analytics.com advises traders to use the Put option and be on the short side. He is bullish on Hindustan Unilever and calls it an outperformer.
RS Sharma Former Chairman, ONGC, says the news is very positive for upstream companies. However, he adds that the ad-hoc subsidy mechanism needs to be resolved.
Shares of ONGC gained 3.6 percent and Oil India rallied 7 percent intraday Wednesday on exemption of under recovery burden for fourth quarter.
The company paid Rs 9,458 crore in fuel subsidy during the quarter when its average crude oil price realisation fell to USD 76 per barrel from USD 108.19 in October-December 2013.
Mehul Thanawala of JM Financial Institutional Securities talks about upstream companies such as ONGC and GAIL, their under-recovery position and stock price. He talks about whether there is a possibility of a re-rating of the GAIL stock. He also shares his views on Oil India and Cairn.
Global crude price in FY14 started to soften and the government introduced a monthly price hike of 50 paise per litre on diesel. The combined effect was a projection of only Rs 80,000 crore as under-recovery for FY14 â€“ a straight cut of 50% from last year. But with rupee fall now, under-recovery projection is now back to Rs 1.6 lakh crore.
For Q1, the subsidy burden has fallen by about 48 percent and that is why upstream companies are now paying Rs 15,000 crore, which is the same as last year and the rest is being paid by the government, which is around 40 percent; 60 percent is coming from upstream companies
Srinivas Rao Ravuri, HDFC MF. says the upside in oil and gas space and deregulation of petrol prices have benefited the oil marketing companies (OMCs). They prefer OMCs over upstream companies.
Oil Minister Veerappa Moily today said the Finance Ministry will have to decide how power and fertilizer sectors will be subsidized. The government has recently doubled natural gas price to USD 8.4 per mmbtu from USD 4.2 mmbtu.
Upstream companies may have to shell out more for oil subsidy contribution in FY14, believes SP Tulsian.
Finance Ministry has approved Rs 45,000 crore for January-March oil subsidy. Meanwhile, export parity pricing, although agreed upon by oil ministry will atleast take three months to be implemented.
The latest hike in diesel prices by Rs 5 per litre will partially help Hindustan Petroleum, Bharat Petroleum and Indian Oil Corporation partially recoup losses. These state-run oil retailers lose around Rs 13-15 on sale of per litre of diesel and are approximately losing Rs 200 crore each day due to government-dictated sale rates.
In a CNBC-TV18 exclusive, sources say that upstream company ONGC‘s subsidy burden for the financial year 2012 will be around Rs 44,000-45,000 crore. Subsidy burden in FY12 stood at Rs 1,38,541 crore.
Upstream companies like ONGC, Oil India and Cairn India which are involved in exploration and production activities have a reason to worry as their toplines will be impacted with this move.
State run Hindustan Petroleum (HPCL) has posted a net profit of Rs 2725 crore for the December quarter as against Rs 211 crore, year-on-year
AK Hazarika, chairman of ONGC, tells CNBC-TV18 that this hike in subsidy to 38.8% translates to a burden of nearly Rs 4000 crore for them.
Dr. Kirit Parikh, Member, Planning Commission, Government of India speaking to CNBC-TV18 about the same said, "Certainly upstream companies are being asked to pay more. It certainly doesn't make much economic sense."
PK Goyal, director of finance at IOC, said that as per the official letter received by the Ministry of Petroleum, IOC’s share in the additional subsidy for upstream companies is only Rs. 2,300 crore but the company will still be having a subsidy burden of Rs 3,800 crore for this year.
India's biggest oil refiner and fuel retailer Indian Oil Corp could slow some domestic expansion projects as the company incurs heavy losses on the sale of subsidised fuel, its head of finance said on Tuesday.