ONGC, Oil India jump up to 3% on sharp cut in windfall tax

The tax on crude oil produced by firms such as state-owned ONGC was reduced to Rs 4,900 per tonne from Rs 10,200 per tonne w.e.f December 02, 2022.

Shares of Oil and Natural Gas Corporation (ONGC) and Oil India jumped 3 per cent each to Rs 144.75 and rs 214.10 on the BSE in Friday’s intra-day trade in an otherwise weak market after the government on Thursday slashed to less than half the windfall profit tax on domestically produced crude oil and also reduced the levy on diesel.

The tax on crude oil produced by firms such as state-owned ONGC was reduced to Rs 4,900 per tonne from Rs 10,200 per tonne. In the fortnightly revision of windfall profit tax, the government cut the rate on export of diesel to Rs 8 per litre from Rs 10.5 per litre, the PTI report suggested.

Cess has been reduced to $ 8.4/bbl from December 2 in the tenth review of windfall taxes. This will decrease cess of domestic oil production companies like ONGC and Oil India.

At 09:47 am, both stocks were trading higher by 1.5 per cent apiece as compared to 0.54 per cent decline in the S&P BSE Sensex.

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Meanwhile, if the proposed revision in the domestic gas pricing formula by the Kirit Parikh committee get implemented, analysts at Emkay Global Financial Services are constructive on both, CGD & upstream players, and see limited downside risks to earnings (in fact, Upstream can see upsides).

“We keep estimates unchanged, awaiting implementation of the recos. A move towards market-linked pricing is structurally positive for Upstream and a floor of USD4/mmbtu will support earnings in case of a downcycle,” the brokerage firm said with retained BUY rating on ONGC and Oil India.