Fitch retains IOC, GAIL rating at 'BBB-'

Global rating agency Fitch today affirmed 'BBB-' rating to Indian Oil Corporation (IOC) and GAIL (Gas Authority of India) India.

The ratings reflect IOC's position as India's largest oil refining and marketing company and the dominant position occupied by public sector companies (PSCs) in the national oil industry, Fitch said in a statement.

Fitch expects the state to continue to provide support to IOC, given its role as the government's extended arm for policy implementation.

The government's policy has been to set tariffs for some refined oil products at levels lower than market prices, leading to under-recoveries, it said.

However, the government has ensured that downstream company's net annual under-recoveries are kept under control through financial support and direction to upstream PSCs to supply feedstock at a discount, it said.

Meanwhile, it said, although GAIL has a strong business and financial profile despite the fuel subsidy burden it shares with the GoI, its rating is effectively constrained by that of the latter.

Fitch believes that GAIL acts as the the government's tool for policy implementation by sharing a part of under-recoveries arising from subsidised LPG and kerosene prices under the directions.