Shares of refining and marketing companies fell on Friday after the government imposed export tax on petrol, diesel and aviation turbine fuel (ATF) and unexpected tax on locally produced crude. The government has imposed a cess of Rs 23,250 per barrel on domestic crude oil production.
As a reaction to the government’s decision, petroleum stocks saw a sharp decline. Shares of oil-to-telecom behemoth Reliance Industries Ltd (RIL) fell nearly 9 per cent to Rs 2,369.45 during the trade, before some recovery took place. While ONGC shares fell 10 per cent in Friday’s opening deal.
Shares of Chennai Petrochem were trading 13 per cent lower at Rs 272.70 and Mangalore Refinery was trading marginally lower, while Bharat Petroleum cut the trend of marginal gains.
Smaller companies such as Omnipotent Industries have lost around 15 per cent. Continental Petroleums and Sanmit Infra also fell up to 4 per cent.
“Reliance is witnessing a sharp decline after the government imposed tax on windfall gains made by domestic refineries. Earlier, Reliance was firing on all cylinders but now there is a pause in its refinery business as the commodity cycle is also reversing, though there is strong growth potential in other verticals,” said Santosh Meena, head (research) Swastika Investmart. The fuel from Mukesh Ambani-led RIL’s Jamnagar refinery is exported to many countries across the world.
The government has changed the export policy on petrol and diesel. Indian exporters will have to sell 50 per cent of the petrol in the domestic market on the total shipping bill.
The government has imposed an equivalent cess of Rs 6 per liter on petrol and Rs 13 per liter on diesel. Additionally, it has imposed an additional tax of Rs 23,250 per tonne on domestically produced crude. According to a notification by the Finance Ministry, companies producing less than 20 lakh barrels have been exempted from this duty.
The tax on exports follows oil refiners, especially the private sector, which benefits heavily from exporting the fuel to markets such as Europe and the US. The tax on domestically produced crude oil is levied after local producers get windfall gains from the jump in international oil prices.
The government clarified that this move will not lead to a rise in the prices of petroleum products. India But will ensure availability of products within the country.
Domestic petrol and diesel prices have been stable since May 21, when the government announced a cut in excise duty on petrol by Rs 8 per liter and on diesel by Rs 6 per liter. Domestic fuel prices are likely to remain low as the taxes announced by the government today have no impact on them.
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