ONGC, Oil India surge on kerosene price hike

It will certainly bring in some relief to the oil exploration companies in India. The Government has finally approved of raising the price of kerosene by 0.25 paise which is going to largely benefit the companies like ONGC and Oil India. The move could benefit ONGC by approximately Rs 1000 crores. It is a fact that Kerosene and LPG are sold below their cost of production. The Government gives a subsidiary of Rs 12 per litre on Kerosene. The proposed hike will lower the Government’s subsidy burden by more than Rs 1000 crores.

On the other hand, the oil marketing companies like Indian Oil Corporation, Hindustan Petroleum, and Bharat petroleum have been asked to raise the Kerosene price over the period of time so that the demand and supply attributes are met.

LPG demand has increased but the kerosene demand in the last 1 year has fallen, which should be a thing to worry.
The companies like ONGC and Oil India would further benefit as both the companies could post a good number in this Q1FY17, as the prices of crude oil in the last couple of months have surged.

The shares of both the companies have fairly reacted to the news. The shares of ONGC are up by 4 per cent on July 13. The shares of the ONGC in the last 3 months have surged by 11 per cent. On the other hand, the shares of Oil India on an intraday basis have surged over 2 per cent. The shares of Oil India in the last 3 months has given a return of 18 per cent.