ONGC, Oil India, GAIL stocks under pressure as windfall tax cut fails to excite Street

Energy stocks such as Oil and Natural Gas Corporation (ONGC), Oil India and GAIL traded in the red on Dalal Street on Tuesday, even as the government reduced the windfall tax on domestically-produced crude oil to Rs 3,500 per tonne from Rs 4,400 per tonne. The government, however, hiked the windfall profit tax on the export of diesel to Re 1 per litre.

Stocks of all of the three PSU upstream oil companies succumbed to selling pressure. Gail shares declined by as much as Re 1.4 or 1.3 per cent to Rs 104.4 apiece. ONGC dropped by Rs 4.9 or 1.9 per cent to Rs 245.8 apiece at the weakest level of the day. Oil India shares inched lower by Re 1.2 or 0.8 per cent to Rs 151 apiece. Reliance Industries shares, however, gained by Rs 68.4 or 3.1 per cent to Rs 2,270 apiece. RIL operates the world's largest single-location oil refinery complex at Jamnagar in Gujarat.

The government levies the tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel.

The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments.

These margins are primarily a difference between the international oil price realised and the cost.

Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel (ATF).

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

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