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http://www.icicidirect.com/mailimages/ICICIdirect_OilandGas_PetrolHike_EventUpdate.pdf
P e t r o l p r i c e h i k e : F i r s t s t e p i n r i g h t d i r e c t i o n …
State oil companies have increased petrol prices by | 7.5-8/litre with
effect from today, compelled by high Brent crude oil prices and rupee
depreciation against the US dollar, resulting in higher costs. Petrol prices
will now cost ~| 78/litre in metro cities like Mumbai, Kolkata and Chennai
whereas in Delhi it will cost ~| 73/litre where local taxes are lower. The
recent petrol price hike was the highest since June 2010 (when petrol
prices were decontrolled) causing it to move up by ~64% since then. The
last petrol price revision took place on December 1, 2011. Since then,
petrol prices have not been touched due to the political compulsions of
the government. Diesel prices, which are still regulated, remain
unchanged at | 40.91/litre in Delhi.
Petrol hike provides little relief
Petrol being a deregulated product, OMCs have the right to implement
any fortnightly price revisions in petrol based on international petrol
prices. However, due to political compulsions, the OMCs were unable to
raise prices for about six months. During this period, the OMCs lost
| 4890 crore and the losses were solely borne by them without any
budgetary support from the government. The recent hike of | 7.5-8/litre
would provide relief to OMCs.
Hikes on regulated petroleum products hold key
According to news reports, a government committee is scheduled to
meet on May 25, 2012 to discuss hikes in diesel, LPG and kerosene. The
oil marketing companies have reported a total under recovery of
| 138,541 crore for FY12 with the product wise under recovery of | 81,192
crore on diesel, | 27,352 crore on kerosene and | 29,997 crore on LPG.
Currently, OMCs are losing | 509 crore/day (| 13.64.litre on diesel,
| 31.48/litre on kerosene and | 480.31/cylinder on LPG). We estimate
gross under-recoveries of ~| 1,68,000 crore and ~| 1,78,500 crore in
FY13E and FY14E, respectively, at US$115/barrel Brent crude oil prices
(| 50/US$). (We would be revising our industry and company estimates
after the quarterly results). Any hike in regulated petroleum products
would have a medium to long term positive impact on state run oil
marketing companies.
Exhibit 1: Petrol Prices (|/litre)
Metros Old Price New Price
New Delhi 65.6 73.2
Mumbai 70.7 78.6
Chennai 69.6 77.5
Kolkata 70.0 77.9
Source: Oil Marketing companies, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.icicidirect.com/mailimages/ICICIdirect_OilandGas_PetrolHike_EventUpdate.pdf
P e t r o l p r i c e h i k e : F i r s t s t e p i n r i g h t d i r e c t i o n …
State oil companies have increased petrol prices by | 7.5-8/litre with
effect from today, compelled by high Brent crude oil prices and rupee
depreciation against the US dollar, resulting in higher costs. Petrol prices
will now cost ~| 78/litre in metro cities like Mumbai, Kolkata and Chennai
whereas in Delhi it will cost ~| 73/litre where local taxes are lower. The
recent petrol price hike was the highest since June 2010 (when petrol
prices were decontrolled) causing it to move up by ~64% since then. The
last petrol price revision took place on December 1, 2011. Since then,
petrol prices have not been touched due to the political compulsions of
the government. Diesel prices, which are still regulated, remain
unchanged at | 40.91/litre in Delhi.
Petrol hike provides little relief
Petrol being a deregulated product, OMCs have the right to implement
any fortnightly price revisions in petrol based on international petrol
prices. However, due to political compulsions, the OMCs were unable to
raise prices for about six months. During this period, the OMCs lost
| 4890 crore and the losses were solely borne by them without any
budgetary support from the government. The recent hike of | 7.5-8/litre
would provide relief to OMCs.
Hikes on regulated petroleum products hold key
According to news reports, a government committee is scheduled to
meet on May 25, 2012 to discuss hikes in diesel, LPG and kerosene. The
oil marketing companies have reported a total under recovery of
| 138,541 crore for FY12 with the product wise under recovery of | 81,192
crore on diesel, | 27,352 crore on kerosene and | 29,997 crore on LPG.
Currently, OMCs are losing | 509 crore/day (| 13.64.litre on diesel,
| 31.48/litre on kerosene and | 480.31/cylinder on LPG). We estimate
gross under-recoveries of ~| 1,68,000 crore and ~| 1,78,500 crore in
FY13E and FY14E, respectively, at US$115/barrel Brent crude oil prices
(| 50/US$). (We would be revising our industry and company estimates
after the quarterly results). Any hike in regulated petroleum products
would have a medium to long term positive impact on state run oil
marketing companies.
Exhibit 1: Petrol Prices (|/litre)
Metros Old Price New Price
New Delhi 65.6 73.2
Mumbai 70.7 78.6
Chennai 69.6 77.5
Kolkata 70.0 77.9
Source: Oil Marketing companies, ICICIdirect.com Research
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