Oil stocks Reliance, ONGC, Adani Gas, IOC fall up to 5%; here’s why

Shares of oil marketing companies were reeling under selling stress on Thursday, with the BSE Energy index falling more than 2% in intraday trade after the government nearly doubled the windfall tax on domestically-produced crude oil and export duty on diesel and aviation turbine fuel (ATF). The hike in windfall tax is likely to impact the profit margin of the oil marketing companies.

In the BSE Energy space, Oil and Natural Gas Corporation (ONGC), Reliance Industries, Adani Total Gas, Indraprastha Gas, Chennai Petroleum Corporation Limited, Mangalore Refinery and Petrochemicals Limited, and Indian Oil Corporation were among top laggards, falling up to 5%. On the other hand, Gujarat Gas, BPCL, HPCL, and Mahanagar Gas were among notable gainers, rising in the range of 1% to 2%.

Shares of ONGC, the country’s largest natural gas explorer, declined as much as 3.14% to hit an intraday low of ₹134.2 on the BSE, while Reliance Industries, the country’s most valued firm, dropped 3.15% to hit a day’s low of ₹2,556.

Similarly, Adani Total Gas tumbled as much as 4.9% to ₹3,570 during the session; Chennai Petroleum Corporation Limited (CPCL), a subsidiary of Indian Oil Corporation, fell 4.8% to ₹277.55; and Mangalore Refinery and Petrochemicals Limited (MRPL), is a division of ONGC, shed 2.8% to ₹70.95 during the session today.

In comparision, the BSE Sensex declined as much as 1014 points, or 1.7%, to hit an intraday low of 58,523 in the bearish trade.

The oil stocks witnessed selling pressure after the government raised levies on diesel and ATF export, and on domestically produced crude oil in its fourth round of revisions since the introduction of the windfall profit tax on oil export in July 2022.

As per a notification issued by the finance ministry on Wednesday night, the export cess on diesel has been increased further to ₹13.5 per litre from ₹9 per litre earlier, while the aviation turbine fuel (ATF) will now attract an export levy of ₹9 per litre from ₹2 per litre earlier. The government has also increased the tax levy on crude oil that is produced in the country to ₹13,300 per tonne from ₹13,000 earlier. The new cess levy will be effective from September 1.

In the April-June quarter of the current financial year (Q1 FY23), state-owned Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), and Indian Oil Corporation (IOC) reported a combined loss of ₹18,480 crore due to a decline in the margin on petrol, diesel, and domestic LPG in the backdrop of a rise in international crude prices. During the April-June quarter of 2022, IOC, BPCL, and HPCL did not revise fuel prices despite a record surge in Brent crude, the global benchmark for oil prices, to help the government contain inflation, which breached 7%. Adding to the woes, the government in May slashed excise duty on petrol and diesel to provide some respite to consumers instead of being used to square off mounting losses on fuel sales.

In Q1 FY23, HPCL posted its highest ever quarterly net loss of ₹10,196.94 crore in Q1 FY23, as a freeze on petrol and diesel prices eroded its refining margins. The PSU had reported a net profit of ₹1,795 crore in the same period a year back. Similarly, IOC, which is nearly double the size of HPCL, registered a net loss of ₹1,992.53 crore for the June quarter, as against a net profit of ₹5,941.37 crore in the same period a year back. This was the first quarterly loss for the company in over two years after the March quarter of 2020, which was mainly due to inventory losses. BPCL also reported a net loss of ₹6,291 crore in the first quarter of the current fiscal, as against ₹3,192.58 crore in the same period last year.