ONGC, Oil India, MRPL, Chennai Petro gain up to 5% after windfall tax cut by govt

The rise in the energy stocks (upstream companies) could mainly be attributed to the government’s move to cut the windfall profit tax on domestically produced crude oil.

India first imposed windfall profit taxes on July 1, 2022 - Reuters

ONGC, Oil India, MRPL, Chennai Petro: Energy stocks such as Oil and Natural Gas Corporation (ONGC), Oil India Limited (OIL), Mangalore Refinery & Petrochemicals (MRPL) and Chennai Petroleum Corporation surged up to 5 per cent on the BSE intraday in morning trade on Friday.

The rise in the energy stocks (upstream companies) could mainly be attributed to the government’s move to cut the windfall profit tax on domestically produced crude oil and reduce the levy on diesel.

Individually, MRPL shares gained the most by over 5 per cent to Rs 61.2 per share, followed by Chennai Petro shares up over 4 per cent to Rs 221.95 apiece. Both ONGC and Oil India shares surged over 3 per cent to Rs 144.75 and Rs 214.1 per share, respectively, on BSE.

The tax on crude oil produced by firms such as state-owned ONGC has been reduced to Rs 4,900 per tonne from the existing Rs 10,200 per tonne, as per a government notification issued on Thursday, according to news agency PTI report.

In the fortnightly revision of windfall profit tax, the government cut the rate on export of diesel to Rs 8 per litre from Rs 10.5 per litre. The levy includes Rs 1.5 per litre as road infrastructure cess.

Being bullish on the Oil & Gas sector, global brokerage firm CLSA said that the cut in windfall tax on domestic crude oil <$10 per barrel fall in brent during the last fortnight. This kept post-windfall tax crude realisation at $78 per barrel, the brokerage added.

Also Watch: Government cuts windfall tax on domestic crude oil, hikes taxes on ATF, Diesel

According to CLSA, the realisation is near the upper end of the range of $74-79 per barrel of the last few resets and ONGC/OIL stock prices imply a $45-50 per barrel realisation.

ONGC and Oil India reported healthy second-quarter earnings for the current financial year, and the operating profits improved owing to sharply higher oil & gas realisations, Probal Sen, Research Analyst at ICICI Securities said, retaining a BUY stance on OIL and ONGC with a target of Rs 267 and 195 per share, respectively.

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. A Rs 23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied.

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