Upstream Oil Companies To Foot 38% Of Fuel Subsidy Bill For 9MFY12

The Indian government has directed the upstream oil & gas majors ONGC, Oil India and GAIL to bear 37.91 per cent of the fuel subsidy bill to compensate the state-run oil marketing companies (OMCs) IOC, BPCL and HPCL for losses incurred on sale of fuel at regulated price during the period April-Dec 2011.
 
As per information available with the oil ministry, the OMCs have coughed up a total under-recovery of Rs 97,313 crore during the April-December 2011 period. Hence, the upstream majors would have to collectively share around Rs 36,881.63 crore of the subsidy bill. In the previous two quarters (Q1 and Q2) they had to foot 33 per cent of the bill as usual. Now with this increase in proportion, we expect the upstream majors to face pressure on the financial front in their forthcoming Q3 earnings’ announcement.

The shares of ONGC, Oil India and GAIL have, however, not witnessed much negative action today. While ONGC is marginally up by 0.12 per cent at Rs 281 per share, Oil India is trading strong at Rs 1,286.5 a piece, up by 2.15 per cent. GAIL is marginally down by 0.37 per cent at Rs 389.45 a share.