RIL, ONGC, Chennai Petrochem rally up to 11% after govt cuts windfall taxes on fuel exports

New Delhi: Shares of oil refining companies soared in Wednesday's trade after the Indian government cut windfall taxes on fuel exports on the back of falling global prices.

India eliminated a levy on gasoline exports and cut windfall taxes on other fuels less than three weeks after they were imposed, offering relief for the nation’s fuel exporters and top crude explorers.

Following the update, shares of Reliance Industries (RIL) rallied more than 4 per cent to Rs 2545.05, topping Rs 17 lakh crore m-cap, before giving up partial gains. The scrip had settled at Rs 2,442.20 on Tuesday.

Oil and Natural Gas Corporation (ONGC) surged more than 7 per cent to Rs 136.40 before trading at Rs 134.65 at 9.20 am. The scrip was at Rs 127.45 on the previous close.

Chennai Petrochem zoomed more than 11 per cent during the early minutes of trade, whereas Mangalore Refinery & Petrochemical zoomed 5 per cent, its daily circuit limit.

Other refining and petrochem companies, including Tamil Nadu Petrochem, Indian Oil and Bharat Petroleum jumped up to 3 per cent.

Foreign brokerage Morgan Stanley said oil refiners such as Reliance Industries, Oil India and ONGC will see a reduction in overhang and equity valuations and should start pricing in high sustainable energy margins as government intent gets clear.

"We believe RIL should get priced at $13-15 a barrel sustainable refinery margins while ONGC gets priced at $75-80 per barrel oil and $6 per mmbtu commodity deck. The two should imply 25-40 per cent upside to equities as energy markets are expected to remain tight despite the current volatility in oil and reduction in global fuel margins from peak levels," Morgan Stanley said.

The centre reduced the windfall tax on diesel and aviation fuel shipments by Rs 2 (3 cents) a litre and scrapped completely a 6-rupee-per-liter levy on gasoline exports.

It also cut the tax on domestically produced crude by about 27 per cent to Rs 17,000 a ton, according to a government notification.

India imposed the taxes on July 1, joining a growing number of nations placing windfall levies to tap energy companies’ booming profits. But international fuel prices have cooled, eroding profit margins at both oil producers and refiners.