Under recoveries to come down for OMCs despite depreciating rupee

Under-recovery estimated at Rs 1.09 lakh cr in 2013-14, 1.01 lakh cr in next yr, down 37% from 2012-13 levels

The under-recoveries outlook for public sector oil marketing companies (OMCs) has improved despite the depreciating rupee, said domestic brokerage ICICI Securities in its research report released today. Brokerages estimate the under-recoveries to be at Rs 1.09 lakh crore in 2013-14 followed by 1.01 lakh crore in the following year, a steep reduction of about 37% from 2012-13 levels.

Rupee depreciation seems to have become a seasonal trend now, as in June last year also the rupee depreciated to 56-57 levels to the US dollar. However, crude prices at that time had declined to $94/bbl levels while this time, though the rupee depreciation is steeper (to 58 levels), crude is at $104/bbl levels. Hence, the impact is more prominent on companies such as Indian Oil Coporation, Bharat Petroleum and Hindustan Petroleum

However, Rohit Ahuja, analyst with the brokerage says, "Regular price hikes in diesel continue (losses have halved to Rs5.7/ltr), hence OMCs are now better placed to face currency and crude price shocks," said Rohit Ahuja, analyst with the brokerage in its report.