Petroleum products exporters ONGC, RIL, MRPL, Vedanta shares fall after government imposes cess on diesel, petrol; know what is triggering correction

Shares of oil exploration companies and refiners witnessed a sharp fall on Friday. The fall was on the back of government's announcement to impose Special Additional Excise Duty (SAED) on export of petrol and diesel. Zee Business' Senior Research Analyst Varun Dubey brings this report on what is triggering the decline.   

Oil & Natural Gas Commission (ONGC), Reliance Industries, Vedanta, Mangalore Refinery & Petrochemicals and Chennai Petroleum Corporation were stocks that were trading in the red. 

"While crude prices have increased sharply in recent months, the prices of HSD and Petrol Petroleum Corporation have shown a sharper increase. The refiners export these products at globally prevailing prices, which are very high. As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market," said the Finance Ministry in a press release.  

"In view of this, cesses equal to Rs 6 per litre on Petrol and Rs 13 per litre on diesel have been imposed on their exports," added the press release.

Dubey said that this was to happen as the oil exploration companies and refiners such as MRPL, ONGC, Chennai Petro, RIL were making huge profits . While India imports crude oil, it exports a lot of petroleum products including petrol, diesel, Nafta. The exports is done to countries including Malaysia, Hong Kong, Mauritius, Singapore, Africa and Europe.  

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Basically, if we take a look at it, last year, India exported petroleum products worth 42.3 billion dollars. Out of which, 6.5 billion dollar worth petroleum products were exported in May 2021 only.

Dubey added that we exported 5.7 million metric tonne worth of petroleum products last year. Out of those exports, 40 per cent exports were Petrol and Diesel only.

The companies that are exporting include Reliance, MRPL, Chennai Petro, ONGC and Cairn to an extent.

In FY2022, we have already exported the most to the UAE. But now due to the Russia Ukraine war, we are also exporting more to europe.

He further said that 95 per cent of the exports that go to Europe come from Reliance only.

He also said that the Jamnagar unit of Reliance is solely focused on exports and hence we should keep an eye on Reliance stock.

It must be noted that, last year, Reliance made 1.5 lakh crores of revenue through exports only. Now that the war is making exports for Europe go higher, we should see that the revenue generated in this year would be greater than the last year, noted Dubey.