Government today announced the much awaited cut on excise duty of petrol and diesel which the market had kept an eye on since the rally of crude prices started. Excise duty on petrol and diesel is cut by Rs1.5/lt each and the oil marketing companies (OMCs) have been asked to absorb Rs1/lt. The overall cut in prices of petrol and diesel will be Rs2.5/lt each.
Center has also asked states to take a similar cut in VAT to keep the petrol and diesel prices under control.
Government expects revenue hit of ~Rs10,500cr this fiscal due the excise cut, which is expected to be ~0.05% of fiscal deficit.
This move is a big negative for OMCs since the Rs1/lt absorption is expected to hit their marketing margins. This also creates uncertainty over whether the OMC’s would be asked to absorb further in future if the oil prices continue to rise. We expect the oil prices to remain volatile in near term with the risk of Iran sanctions and uncertainty over oil supply to cover the gap.
Followed by the government's anouncement, state governments UP, Maharashtra, Gujarat, MP, Chhattisgarh, Jharkhand, Tripura, Assam, Arunachal Pradesh, Himachal Pradesh and Haryana also announced reduction in prices, as per media reports.
Hindustan Petroleum Corporation Ltd
ended at Rs220.60 down by Rs30.75 or 12.23% from its previous closing of Rs251.35 on the BSE.
Bharat Petroleum Corporation Ltd ended at Rs336.35 down by Rs41.1 or 10.89% from its previous closing of Rs377.45 on the BSE.
Indian Oil Corporation Ltd ended at Rs140.85 down by Rs16.65 or 10.57% from its previous closing of Rs157.50 on the BSE.