Govt's decision to reduce fuel prices credit negative for OMCs: Moody's

'Despite the negative earnings effect of the government's decision, we continue to expect the three OMC to report higher EBITDA in fiscal 2019 versus fiscal 2018'

The government’s decision last week to reduce fuel prices through state and Centre tax and price cuts taken by oil marketing companies (OMCs) may have far-flung impact on the domestic oil industry, a Moody’s report has stated. The immediate impact, according to the rating agency’s note, would be credit negative for the OMCs. 

Moody’s in its note raises concerns over increased borrowings for OMCs, rating downgrades, further directives to absorb fuel prices and pressure on upstream companies to increase in shareholder returns or subsidise crude oil prices. 

On October 4, the government (“Baa2 stable”) reduced petrol and diesel retail selling prices by