The Hindu Business Line : Oil marketing cos remain weak despite bond assurance

Mumbai, March 12 Even though the Government will be issuing oil bonds to public sector oil retailers, sky-rocketing crude oil prices have pushed share prices of these companies down on Wednesday.

The Government on Wednesday announced that it will be issuing oil bonds worth Rs 9,297 crore to Indian Oil, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd to compensate them for selling domestic LPG and PDS kerosene below cost during the December-October quarter.

Of the fresh approval, Indian Oil is likely to get Rs 5,098 crore worth of oil bonds.

Incidentally, these stocks traded in the red on the bourses on Wednesday.

Indian Oil was down 2.23 per cent at Rs 503.50, HPCL plunged 3.75 per cent and closed at Rs 276 and BPCL fell 3.38 per cent to Rs 428.60. GAIL India too was down 1.03 per cent to end the day at Rs 416.25.

Margin pressure

Market men say that these stocks suffered on Wednesday due to high crude oil prices.

“Crude oil prices are climbing higher every day. This would now pressurise the Government to raise State-set fuel prices,” said an analyst with a brokerage. Crude oil traded at a record $109.72 a barrel on Tuesday.

The Government has not allowed public sector oil retailers to raise prices of petrol, diesel, domestic LPG and kerosene for PDS sale despite the rise in crude prices but will, instead, compensate them for 42.7 per cent of the revenue loss through issue of oil bonds.

Marginal increase

“The Government has just hiked the fuel prices and in the next three to four months there will be no further rise in prices.

"These public sector companies will feel the heat as when the crude prices keep rising, their procuring costs will also rise,” he added.

The Government brought in a marginal increase in petrol and diesel prices by Rs 2 per litre and Re 1 a litre respectively with effect from February 15, 2008.

Market men say that the Government issuing bonds would benefit the private sector oil companies as they have their own fields and refineries and they export as well. Stocks of both Reliance and Cairn India were up on Wednesday.

The former was up by 1.26 per cent and closed the day at Rs 2,376.20 and the latter was up by 7.24 per cent at Rs 248.15.

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