Oil & Gas

Crude oil prices at $70 a barrel suggest that under-recoveries, although lower than in 2008-09 (Rs 103,000 crore), would work out to Rs 50,000 crore (Rs 500 billion). The oil marketing companies (OMC) are losing Rs 6 per litre and Rs 2 per litre on petrol and diesel, respectively. Besides OMCs, upstream companies and the government (oil-bonds) would have to chip in majorly.

A full deregulation of fuel prices looks distant; however, there are expectations that retail fuel prices (say up to crude oil price of $75) would be partially de-regulated. If this comes through, it will be positive for OMCs. The move would also help private players like Reliance Industries as it creates a level playing field.

For ONGC, deregulation would lower its subsidy outgo. ONGC could also benefit if gas prices are hiked. A tax holiday for natural gas producers from NELP blocks will be positive for companies like Reliance Industries, while inclusion of natural gas as declared goods would benefit companies like Indraprastha Gas.