PSU OMCs, upstream oil firms edge higher

Shares of PSU OMCs and upstream oil firms rose 0.81% to 1.85% at 10:22 IST on BSE on reports that under- recoveries of oil firms are set to come down substantially in the current fiscal on account of better pricing and stable global crude prices.

Shares of PSU OMCs viz. HPCL (up 1.85% at Rs 455.95), Indian Oil Corporation (up 1.15% at Rs 359.40), and BPCL (up 0.81% at Rs 673.70) edged higher.

Shares of upstream oil & gas producers viz. GAIL (India) (up 1.39% at Rs 434.65), ONGC (up 1.04% at Rs 428.20), and Oil India (up 0.93% at Rs 607) edged higher.

Meanwhile, the S&P BSE Sensex was up 70.35 points or 0.27% at 26,384.64.

Oil Secretary Saurabh Chandra reportedly said on Wednesday, 20 August 2014, that the under-recoveries of oil companies will come down substantially in the current fiscal ending 31 March 2015 (FY 2015) on account of better pricing and stable global crude prices. The under-recoveries are expected to come below Rs 1 lakh crore this fiscal as against Rs 1.40 lakh crore last fiscal. The expected substantial contraction in the under-recoveries will come on the back of reducing gap in the pricing of petroleum products.

Public sector oil marketing companies (PSU OMCs) -- BPCL, HPCL and Indian Oil Corporation -- suffer revenue loss on domestic sale of diesel, LPG and kerosene at a controlled price. The government has adopted the policy of gradually increasing diesel prices to eliminate under recovery and deregulate the diesel prices. The government has already freed pricing of petrol.

Meanwhile, upstream oil producers ONGC, Oil India and GAIL (India) absorb part of the under-recoveries of state-run PSU OMCs.

The under-recovery on High Speed Diesel (HSD) applicable for second fortnight of August 2014, effective from 16 August 2014, will go up to Rs 1.78 per litre. This was Rs 1.33 per litre during first fortnight of August 2014. In the case of PDS Kerosene and Domestic LPG, the under-recoveries for the second fortnight of August 2014 will be Rs 32.98 per litre (Rs 32.98 per litre in first fortnight) and Rs 447.87 per cylinder (Rs 447.87 per cylinder in first fortnight) respectively. Effective from 16 August 2014, PSU OMCs are incurring combined daily under-recovery of about Rs 230 crore on the sale of Diesel, PDS Kerosene and Domestic LPG. This is higher than Rs 226 crore daily under-recoveries during first fortnight of August. The under-recoveries for the financial year 2014-15 are projected to be Rs 91665 crore while the figure was Rs 1.39 lakh crore in 2013-14.

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