Budget stepped on the gas for GAIL, IGL; but no fuel for RIL, ONGC & OIL

Budget 2020 had a fair dose of measures for the oil & gas sector, including an increase in petroleum subsidies, expansion in gas grid and abolition of anti-dumping duty on PTA (purified terephthalic acid). Analysts see neutral impact on the sector from these announcements.

IIFL Securities said the Budget has raised allocation on LPG and kerosene subsidy by 6 per cent for FY21.

“For FY21, the subsidy amount has been raised by 6 per cent to Rs 40,900 crore from Rs 38,600 crore. Within this, LPG subsidy has risen 9.4 per cent to Rs 37,300 crore while provisions for kerosene has been reduced (perhaps due to declining consumption),” it said and said the step should be neutral for the sector.

Reliance Securities said cooking fuel subsidy for FY21 is budgeted at a crude price higher than $68 a barrel, a level crude price is unlikely to touch anytime soon. “It indicates that the government continues with the reforms agenda with no subsidy burden for ONGC, OIL and OMCs,” it said.

Shares of ONGC have fallen 5 per cent in the last two days to Rs 103.40. Oil India has fallen 5 per cent in the two-day period to Rs 123.10. OMCs IOC and HPCL have declined 4-5 per cent while BPCL has gained 0.82 per cent in the last two days.

Kotak Mutual Fund estimates gross under-recovery at Rs 31,500 crore for FY21, valuing crude at $65 a barrel. “The Budget allocation will thus be utilised for carry forward Q4 subsidy into the next year,” it said.

ET Energy World
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