OMCs may be asked to absorb price hike; shares tumble

Kenny Tucker
April 14, 2018

The proposed refinery will be capable of processing 1.2m barrels of crude oil per day - some of which will be Arabian crude - and produce a range of refined petroleum products, including motor spirit and diesel, which will meet Euro VI fuel specifications, International Olympic Committee said in a filing to the Bombay Stock Exchange (BSE).

Mumbai: Shares of state-owned oil marketing companies (OMCs) on Wednesday plunged on reports the government had asked them to absorb the hike in crude oil prices ahead of the Assemby elections in Karnataka. "The Indian economy's vulnerability to worldwide oil price will also increase", IEA executive director Fatih Birol told reporters on the sideline of the energy forum.

According to V.K. Sharma, head (private client group and capital market strategy) at HDFC Securities, this led to the sharp de-rating of government oil marketing companies. If we dont bring competitor in the long term, then there would be no solution.

In addition to the refinery, cracker and downstream petrochemicals facilities, the project will also include the development of associated facilities such as a logistics, crude oil and product storage terminals, raw water supply project as well as centralised and shared utilities, the statement said.

The prices at petrol pumps of state-owned fuel retailers like International Olympic Committee were cut by 1-3 paisa every day in the first fortnight of December. By some accounts, as much as 45 paisa increase warranted in petrol and diesel rates was not passed on. Bharat Petroleum Corp Ltd dropped as much as 5.6 per cent, while Indian Oil Corp Ltd fell almost 6 per cent.

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"No, we haven't heard from the government anything (on dropping daily price revision)", IOC Chairman Sanjiv Singh had stated yesterday. HPCL is not aware of any directive from the government to absorb a part of the losses from higher crude prices, the company's chairman, MK Surana, said on the sidelines of the International Energy Forum in New Delhi.

The government had in June 2010 freed petrol price from its control and the diesel rates were deregulated in October 2014. Since then, prices are revised on a daily basis.

State-owned oil companies had in June last year scrapped the 15-year old practice of revising rates on the 1st and 16th of every month.

Incidentally, oil companies did not change rates at their pumps yesterday. Since hitting a low of $27 per barrel in 2016, Brent crude is now trading around $70 level.

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