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Exemption from Subsidy Payout : Breathing Space for O&G Upstream Players in India

 

India's oil ministry has set interim rules that exempt state-run upstream companies from giving any discount on crude and refined fuel sales if global oil prices average up to $60 a barrel this quarter, two sources with direct knowledge of the matter said.

Source:  Economic Times

 

SNP Insights

Exemption from paying subsidy seems to be major boost towards, cash flow of Upstream companies. Because of subsidy payout Upstream companies lost around $5 to $8 per barrel, on production cost of crude oil, due to cheap oil prices in global market last fiscal year. So this interim exemption would be a major relief for them. New rule seems optimistic from end consumer perspective also ,as companies have to bear 85% of incremental cost, if price goes beyond $60/Barrel. Although this new rule, seem to be very much encouraging for market sentiments, yet actual implication is yet to be witnessed.