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Elections 2012: Should Oil Retailers Expect Diesel, Petrol Price Hike?

  • The surge in the crude oil prices due to the geopolitical crisis in the

  • Middle East has resulted in mounting under-recoveries during the current fiscal. In addition to the pressure on the oil marketing companies (OMCs), the uncertainty on the subsidy sharing mechanism has raised the risk for the upstream public sector undertakings (PSUs) like ONGC, GAIL and Oil India. However, a likely increase in the price of petroleum products like diesel, petrol, kerosene and LPG in the forthcoming budget could provide some relief primarily to the Oil marketing companies

  • This is what Sharekhan believes will be in store for the oil and gas sector in Union Budget 2012-13

  •  Currently, there is a seven year tax holiday for refining companies. But the exemption is only for those refineries which have been commissioned before March 2012.  If there is an extension granted, it will be positive for the sector as downstream companies like Indian Oil Corp (IOC) are setting up 15 mmtpa refinery in Orissa and could get tax benefits

  • Price of diesel, petrol, kerosene and LPG are expected to increase which will be a big positive to Hindustan Petroleum, Bharat Petroleum and IOC, since their under-recoveries will come down to an extent. It will also reduce subsidy burden of ONGC and Oil India.

  • There is a 2.5% import duty on petrol and diesel and 5% on LNG and natural gas which is unlikely to change in the upcoming budget.

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