- Increase of 25 paise a liter a month approved from July 1
- The move will directly benefit ONGC, Oil India, analyst says
Indian oil producers Oil and Natural Gas Corp. and Oil India Ltd. gained as the government was said to have allowed refiners to raise the price of kerosene each month for 10 months, reducing the burden of subsidies.
ONGC rose as much as 6 percent to 241.55 rupees, the highest on an intraday basis in six months, and traded 3.6 percent higher at 1:18 p.m. in Mumbai. Oil India rose as much as 4.2 percent to 380.90 rupees, its highest intraday level since Jan. 11. The benchmark S&P BSE Sensex slipped 0.1 percent.
Refiners have been allowed to raise prices by 25 paise per liter monthly, starting July 1, according to officials at two state-owned processors, who ask not to be identified because of internal policy. India supplies kerosene at reduced prices to the country’s poor with the government and oil producers sharing the burden of the subsidy. The approval was reported Wednesday by The Economic Times, which cited people it didn’t identify and said the increase was the first in five years.
“This move will directly benefit ONGC and Oil India,” said Dhaval Joshi, an analyst at Emkay Global Financial Services Ltd. in Mumbai. “There will be a reduction in their subsidy burden.”
The monthly price revisions will probably reduce the subsidy burden on ONGC and Oil India by as much as 7.6 billion rupees ($113 million) in the financial year ending March 31, 2017, and by about 20.4 billion rupees in the following year, analysts including K. Ravichandran at ICRA Ltd. wrote in a report.
The subsidy on kerosene was about 115 billion rupees in the year ended March 31, according to oil ministry’s Petroleum Planning and Analysis Cell.