OMC Stocks Tumble By Over 25% After Absorbing Rs. 1/Litre In Fuel Price Cut

Oil Marketing Companies (OMCs) were dragged lower in opening session by 20-25% after the government pitched in to check rising fuel prices and announced a cut of Rs. 2.5 per litre on both diesel and petrol. Of this amount, OMCs have been asked to absorb Rs.1 per litre and this is likely to dent their net profit figure by Rs. 9000 crore.

Indian Oil recouped early opening losses after reaching 52-week low of Rs. 105.65 and quoted at Rs. 121.20, down 13.95%, BPCL was down by 18.78% and quoted at Rs. 273.20 after sinking to 52-week low of Rs. 239. Meanwhile, Hindustan Petroleum also quoted lower at Rs. 173, down by 21.58%.

Excise duty of Rs. 1.5 has been cut amid surging fuel prices and also state governments have been asked to slash VAT on auto fuel by Rs. 2.5. The announcement has brought some relief to consumers at a time when fuel prices hit record highs across India.

The pricing formula used by oil retailers includes 80% of import price and the rest 20% export price of the fuel. Further, other components that include excise duty, VAT and dealer commission are added.

Meanwhile, the benchmark index Sensex again lost 0.96% or 338 points and Nifty traded below 10500 ahead of the monetary policy outcome.

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