ONGC, Chennai Petro, RIL Shares Skid Up To 13% As Govt Slaps Duties on Petrol, Diesel, Crude

ONGC, Chennai Petro, RIL Shares Skid Up To 13% As Govt Slaps Duties on Petrol, Diesel, Crude

Shares of oil refining and marketing companies slipped on Friday after the government slapped an export tax on petrol, diesel and aviation turbine fuel (ATF), and imposed a windfall tax on crude oil produced locally. The government has imposed a cess of Rs 23,250 per barrel on domestic crude oil production.

As a reaction to the government’s decision, petroleum stocks witnessed a sharp fall. Shares of oil-to-telecom behemoth Reliance Industries Ltd’s (RIL) shares tanked about 9 per cent to Rs 2,369.45 during the trade, before making some recovery. While ONGC’s shares declined 10 per cent in Friday’s early deals.

Shares of Chennai Petrochem plunged 13 per cent to Rs 272.70 and Mangalore Refinery was trading mildly lower, whereas Bharat Petroleum bucked the trend to gain marginally.

Small players such as Omnipotent Industries plunged about 15 per cent. Continental Petroleums and Sanmit Infra also shed up to 4 per cent.

“Reliance is witnessing a sharp fall after the government has levied taxes on windfall gains made by domestic refineries. Earlier, Reliance was firing on all cylinders but now there is a break in its refinery business as the commodity cycle is also reversing however other verticals have strong growth potential,” said Santosh Meena, head (research) at Swastika Investmart. Fuels from Mukesh Ambani-led RIL’s Jamnagar refinery are exported to several countries across the world.

The government has changed the export policy on petrol and diesel. Indian exporters will have to sell 50 per cent petrol in the domestic market on the total shipping bill.

The government has imposed cesses equal to Rs 6 per litre on petrol and Rs 13 per litre on diesel on their exports. Additionally, it has levied a Rs 23,250 per tonne additional tax on crude oil produced domestically. Companies with a production of less than two million barrels are exempted from this duty, according to a notification by the finance ministry.

The tax on exports follows oil refiners, particularly the private sector, reaping huge gains from exporting fuel to markets such as Europe and the US. The tax on domestically produced crude oil follows local producers reaping windfall gains from the surge in international oil prices.

The government clarified that the move would not push the prices of petroleum products in India but will ensure the availability of products within the nation.

Domestic petrol and diesel prices have been steady since May 21, when the government announced a cut in excise duty on petrol by 8 per litre, and 6 rupees per litre on diesel. The domestic fuel prices are likely to remain low as the taxes announced today by the government do not impact them.

faracdcom