Subsidy relief buzz: Oil India, ONGC shares gain 3 per cent

Shares of Oil India Ltd and ONGC today rose by about 3 per cent following a report that government is likely to exempt the state-run firms from payment of fuel subsidy during the rest of the fiscal due to steep decline in global oil rates to around USD 50 per barrel.
The scrip of Oil India Ltd gained 3.08 per cent to settle at Rs 566.40 on the BSE. During the day, it jumped 7.74 per cent to Rs 592 apiece.
Similarly, ONGC's stock rose by 2.77 per cent to end the day at Rs 351.05. Intra-day, it climbed 4.44 per cent to Rs 356.80.

Upstream producers Oil and Natural Gas Corp (ONGC) and OIL made good nearly half of the revenue loss, or under- recoveries, fuel retailers incurred on selling cooking fuel and diesel until recently at government controlled rates.
This subsidy contribution was by way of discount on crude oil they sold to the downstream firms and it was capped at USD 56 per barrel in 2013.
With global oil prices tumbling to its lowest level since April 2009, the continuation of the subsidy-sharing formula would mean that ONGC will not just have to sell crude oil to refiners like Indian Oil Corp (IOC) for free but also pay another USD 6 per barrel from its pocket.

In such a scenario, the government is considering exempting ONGC and OIL from payment of subsidy during reminder of the current fiscal, sources privy to the development said.