Synopsis:
Companies like HPCL, BPCL, and IOC are in focus after the finance ministry is seeking to aid the companies on their losses for selling cylinders below the market price
The shares of Oil Marketing Companies (OMCs) are in focus after the finance ministry is expected to approve setting up a fund to aid the companies get some relief on their losses accrued on selling LPG gases below the market price.
The Finance Ministry is likely to provide a relief package of Rs 32,000–35,000 crore to oil marketing companies (OMCs), according to sources. While this support will help ease their burden, it still falls short of the Rs 40,000 crore earlier sought by the Petroleum Minister.
The government plans to compensate oil marketing companies (OMCs) for their losses, known as “under-recoveries,” by using the money it earns from recent increases in excise duty, a tax on fuel. This money will go into the Consolidated Fund of India, which functions as the central government’s main bank account.
It is estimated that around Rs 41,000 crore of losses are incurred by the Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation on Liquefied Petroleum Gases (LPG) during their sales in FY25, as they were selling the cooking gas below the market price.
Despite a 60 percent surge in global LPG prices in FY24, domestic prices largely remain unaffected, especially for beneficiaries under the Pradhan Mantri Ujjwala Yojana (PMUY).
Going forward, understanding the final package amount, the timing of disbursement, and how it shows up in quarterly earnings will be key factors for the stock performance of these companies.
Written by Satyajeet Mukherjee
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