PSU OMCs tumble

Shares of three state-run oil marketing companies fell by 1.36% to 2.35% at 9:30 IST on BSE on a media report that state-run oil marketing companies may have to absorb a higher share of under recoveries this fiscal year ending March 2014.

BPCL (down 2.35%), HPCL (down 1.83%) and Indian Oil Corporation (IOC) (down 1.36%), edged lower.

Shares of state-run upstream companies also fell. ONGC (down 1.27%), and Oil India (down 1.04%), edged lower.

The S&P BSE Sensex was down 27.95 points, or 0.13% at 21,804.91.

According to the report, finance ministry wants public sector oil marketing companies (PSU OMCs) to absorb a much higher share of under recoveries this fiscal year ending March 2014 (FY 2014). PSU OMC's IOC, HPCL and BPCL have reportedly been given feelers of having to absorb as much as Rs 5000 crore in FY 2014 as against Rs 900 crore in the fiscal year ending March 2013 (FY 2013).

However, PSU OMCs are reportedly hoping to negotiate their share of under recoveries down to almost Rs 3500-3700 crore in FY 2014.

Meanwhile, upstream companies' ONGC and Oil India's contribution is at par with street estimates at Rs 65400 crore, the report added.

Report suggested that finance ministry believes the PSU OMCs can pay a much higher share as their profits and gross refining margins (GRMs) are comparatively higher this fiscal.

Also, there is no scope to increase ONGC and Oil India' contribution as the two companies have already been squeezed into collectively buying 10% stake in IOC for Rs 53400 crore and both these upstream companies will also shell out interim dividends. The government's share in FY 2014 is seen at just under Rs 71000 crore including Rs 35000 crore rollover, report added.

PSU OMCs suffer under-recovery on domestic sales of diesel, kerosene and LPG at government controlled prices. The government compensates PSU OMCs for their under-recoveries through oil bonds. The rest of the cost-price gap is borne by three state-run oil and gas firms -- GAIL (India), ONGC and Oil India.

The under-recovery on High Speed Diesel fell 14.46% to Rs 7.16 per per litre in the second fortnight of March effective 16 March 2014. In the case of PDS Kerosene and Domestic LPG, the under-recoveries for the month of March 2014 remains unchanged at Rs 36.34 per litre and Rs 605.80 per cylinder respectively as their refinery gate prices are determined on monthly basis, Ministry of Petroleum said in statement on Tuesday, 18 March 2014.

The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas has reviewed international prices of crude oil and petroleum products during the first fortnight of March 2014. Oil Marketing Companies (OMCs), effective 16, March 2014, are now incurring combined daily under-recovery of about Rs 399 crore on the sale of Diesel, PDS Kerosene and Domestic LPG. This is lower than Rs 411 crore daily under-recoveries during previous fortnight effective 1 March 2014.

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