BackOil and gas shares surge on diesel deregulation, gas price hike
ONGC rises as much as 8.74%, while GAIL India jumps as much as 3.73%
Premium
Mumbai: Shares of oil and gas companies surged on Monday after the government on Saturday announced diesel price deregulation and the gas price hike from the current $4.2 per million British thermal unit (mmBtu) to $5.61.
Oil and Natural Gas Corp. Ltd (ONGC) rose as much as 8.74%, while GAIL India Ltd rose as much as 3.73%—both beneficiaries of gas price hike and diesel deregulation. Neither will have to pay for under-recoveries (revenue loss for selling it under production cost) in the case of diesel sales.
Oil marketing companies (OMCs) jumped after the government deregulated diesel prices. Hindustan Petroleum Corp. Ltd (HPCL) jumped as much as 8.7%, Bharat Petroleum Corp. Ltd climbed (BPCL) as much as 7.3% and Indian Oil Corp. Ltd (IOC) rose as much as 7.92%.
Deregulation will facilitate greater competition and enhanced efficiency in service delivery of oil companies and benefit consumers, the oil minister said.
Rise in gas price would boost ONGC profit by ₹ 1,930 crore in FY15 as revenue increases by ₹ 3,210 crore, while FY16 profit will rise to ₹ 4,630 crore on a revenue jump of ₹ 7,710 crore, the company’s chairman D.K. Sarraf said in a conference call, Bloomberg reported.
The BSE oil and gas index rose as much as 3.2%.
Private explorers were trading lower. Reliance Industries Ltd fell 0.7% to ₹ 931.80 as the new formula prices gas much lower than the one suggested by the Rangarajan committee under the previous Congress-led United Progressive Alliance (UPA) government.
The revised higher price will not be applicable to the KG-D6 gas basin, where RIL is the contractor, till the outcome of the arbitration proceedings, Jaitley said on Saturday.
On Sunday, Bloomberg reported rating agency Moody’s as saying that India’s rating and outlook include such policy changes and the diesel decontrol reduces exposure of government finances to oil.
Shares of ONGC ended up 5.44%, GAIL India rose 2.41%, HPCL surged 7.28%, BPCL advanced 4.57%, IOC jumped 3.84%, while RIL ended 0.4% down. BSE OIl and Gas Index rose 1.94%.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
