The rally in the BSE Oil and Gas index on expectations of pricing reforms reversed due to crude oil’s rout. The index is now up 19 per cent over the past year, but down 9 per cent since the last July’s budget.

The halving in crude oil prices since June 2014 has hurt exploration stocks Cairn India, ONGC and Oil India. Cairn’s profit in the first half of 2014-15 nearly halved year-on-year. Refining biggie Reliance Industries also took a hit due to lower realisations. But there are beneficiaries too. Lubricant maker Castrol India which uses crude oil derivatives as raw material gained on the bourses. The benefit in the financials will show after some lag. The Centre’s smart move to decontrol the price of diesel helped public sector oil marketing stocks HPCL, BPCL and Indian Oil. Low crude oil price will mean inventory losses for these companies in the near-term, but long-term gains due to lower subsidies.

The PSU upstream companies ONGC and Oil India, which share the fuel subsidy, should also benefit. But with lack of clarity on subsidy sharing on LPG and kerosene there are fears that these companies will suffer low realisations. While the OMCs have improved their financial performance this fiscal, the upstream companies have seen profits fall or remain flat.

The stock of gas importer Petronet LNG has gained on hopes of higher volumes due to lower global gas prices. But underutilisation of its Kochi plant for want of pipeline connectivity poses challenges. Clarity on subsidy sharing, if provided in the Budget, will give respite to PSU upstream companies. To encourage exploration, the sector wants concessions on service tax and longer period of tax breaks.