The new excise duty will severely restrict the benefits from elevated global crude oil prices for ONGC, Oil India
Mumbai / July 01, 2022 / 11:15 AM IST
Representative image (Source: Reuters)
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Shares of Oil and Natural Gas Corporation and Oil India sank on July 1 after the government imposed a special additional excise duty of Rs 23,250 per tonne of crude oil production.
In a wide-ranging notification by the government that has sought to curtail some of the outsized benefits reaped by domestic oil producers and crude oil refiners, the government has imposed special excise duties or windfall gains tax on the oil and gas industry.
The imposition of the new excise duty will severely restrict the benefits from elevated global crude oil prices to earnings of companies like ONGC and Oil India.
Also Read: Refining and oil drilling shares hit the skids after government tax raid
Recently, several brokerage firms had either upgraded their ratings or their price targets on both the stocks in anticipation of bumper earnings in 2022-23 following a sharp surge in global crude oil prices earlier this year.
Global crude oil prices have risen more than 40 percent in 2022 following the sanctions imposed on Russian crude oil exports by several Western countries in the wake of the country’s invasion of neighbor Ukraine.
Brent crude oil futures rose as high as $ 137 per barrel in March but has since given off some gains to trade at $ 115 per barrel currently. Yet, several global brokerage firms expect crude oil prices to remain above the $ 100 per barrel mark over the next 18 months owing to strong demand and severely restricted global supplies.
With average crude oil realisations for ONGC and Oil India expected to rise sharply to more than $ 90-100 per barrel in 2022-23 as compared to around $ 70 per barrel in 2021-22, analysts had expected a sharp upgrade to the earnings per share of both the companies.
At 10:45 am, shares of ONGC were down sank 10 percent to Rs 136.4 on the National Stock Exchange while those of Oil India plummeted 6.8 percent to Rs 234.50.
