ONGC, Oil India and other stocks a mixed bag as govt reimposes windfall tax on locally produced crude

The oil production and exploration stocks such as Oil and Natural Gas Corporation (ONGC), Oil India, Mangalore Refinery & Petrochemicals Limited (MRPL), and Chennai Petroleum Corporation among others were a mixed bag during Wednesday’s trading session on the BSE.

Earlier today, the government reimposed a windfall tax of Rs 6,400 on domestically produced crude oil applicable from April 19, 2023. It scrapped the export duty on diesel and the windfall tax on petrol and aviation turbine fuel (ATF) continues to be zero.

Energy stocks such as ONGC, Oil India, MRPL, and Chennai Petro were hovering near the flatline in the otherwise subdued market today. Except for MRPL, which was up over 0.5 per cent intraday, all other upstream companies’ shares were marginally down between 0.1-0.4 per cent on the BSE today.

The government had started imposing windfall gains to tax super-normal profits of oil producers and fuel exporters from July 2022 at the time when international crude oil prices were pushed to an all-time high due to the Russia-Ukraine war crisis.

The government reviews these windfall taxes every fortnight.

In the previous fortnightly revision, the government had scrapped the windfall tax on locally produced oil from Rs 3,500 per tonne to zero and also halved the duty on diesel export to 50 paise per litre.

Q4 Earnings Expectations

The upstream firms may continue to benefit from high APM (Administered Price Mechanism) prices of US$8.6/mmbtu in the March quarter of the previous fiscal, according to Kotak Institutional Equities.

While oil prices were lower by 8 per cent, due to lower windfall taxes, the domestic brokerage expects net oil realization to be 1-2 per cent higher. However, due to sequential weaker volumes, it sees EBITDA may decline by 2 per cent quarter-on-quarter for both ONGC and Oil India.

Whereas analysts at Prabhudas Lilladher believe upstream companies will post muted/flat Q4 earnings due to steady net crude price realisation post windfall taxes and flat gas prices. Besides, the production and sales volumes are likely to be flat sequentially, the domestic brokerage said. 

With Agencies Inputs