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Oil & Gas NEUTRAL
MAT rate increased from 18% to 18.5%. Surcharge reduced to
5% from 7.5%
Impact on companies:
Slightly negative for RIL, Cairn (currently paying MAT on profits from E&P
business) as this will increase the consolidated tax rate marginally
Imposing sunset clause for MAT exemption for SEZ units
effective March 2012
Impact on companies:
A negative for RIL, from earnings perspective (from FY13 onwards), however NAV
won’t be affected much. We assume RIL would be eligible for MAT credit
entitlement in later years.
Status quo on custom duty for crude and petroleum products
Impact on companies:
Marginal negative for OMCs (BPCL IN, HPCL IN): A reduction would have
reduced the burden of heavy losses on sale of petrol and diesel, which at our
FY12E average crude price of USD110/bbl and current retail prices is estimated at
~INR1500b.
Neutral for domestic standalone refiners like MRPL (MRPL IN)
Cash based subsidy for OMCs to continue in FY12, but
budgeted figure much lower compared to our estimates
The government has budgeted cash compensation for under-recoveries (on account of
sale of sensitive petroleum products) at INR200b for FY12. This implies a total underrecovery
estimate of ~INR400b (assuming 50% sharing by the government, as in
FY11). This budgeted estimate implies a much lower crude average of USD75/bbl
compared to our estimate of USD110/bbl and also the current run rate of the same
level.
The government is also considering direct cash transfers to compensate for PDS
Kerosene (under a public distribution system) from March 2012. The Aadhaar scheme,
which the government expects to kickstart from October 2011, is estimated to generate
0.1m cards per day and could help the government in its direct cash transfer
endeavours. This should reduce rampant diversion of the heavily subsidised fuel, where
OMCs are currently losing ~INR21/litre sold.
Clarifications missed out in the budget
There was continued uncertainty on the applicability of section 80-IB towards natural
gas producers awarded blocks in NELP-I to NELP-VII and extension of the same to
CBM and pre-NELP.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oil & Gas NEUTRAL
MAT rate increased from 18% to 18.5%. Surcharge reduced to
5% from 7.5%
Impact on companies:
Slightly negative for RIL, Cairn (currently paying MAT on profits from E&P
business) as this will increase the consolidated tax rate marginally
Imposing sunset clause for MAT exemption for SEZ units
effective March 2012
Impact on companies:
A negative for RIL, from earnings perspective (from FY13 onwards), however NAV
won’t be affected much. We assume RIL would be eligible for MAT credit
entitlement in later years.
Status quo on custom duty for crude and petroleum products
Impact on companies:
Marginal negative for OMCs (BPCL IN, HPCL IN): A reduction would have
reduced the burden of heavy losses on sale of petrol and diesel, which at our
FY12E average crude price of USD110/bbl and current retail prices is estimated at
~INR1500b.
Neutral for domestic standalone refiners like MRPL (MRPL IN)
Cash based subsidy for OMCs to continue in FY12, but
budgeted figure much lower compared to our estimates
The government has budgeted cash compensation for under-recoveries (on account of
sale of sensitive petroleum products) at INR200b for FY12. This implies a total underrecovery
estimate of ~INR400b (assuming 50% sharing by the government, as in
FY11). This budgeted estimate implies a much lower crude average of USD75/bbl
compared to our estimate of USD110/bbl and also the current run rate of the same
level.
The government is also considering direct cash transfers to compensate for PDS
Kerosene (under a public distribution system) from March 2012. The Aadhaar scheme,
which the government expects to kickstart from October 2011, is estimated to generate
0.1m cards per day and could help the government in its direct cash transfer
endeavours. This should reduce rampant diversion of the heavily subsidised fuel, where
OMCs are currently losing ~INR21/litre sold.
Clarifications missed out in the budget
There was continued uncertainty on the applicability of section 80-IB towards natural
gas producers awarded blocks in NELP-I to NELP-VII and extension of the same to
CBM and pre-NELP.
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