The Hindu Business Line : Better earnings from oil firms seen this quarter

EARNINGS of state-owned oil marketing companies are likely to improve a shade sequentially in the second quarter of the current fiscal as domestic price hike cushions the spiralling global oil price, analysts said. "We expect global prices will stay firm at least for a month or might marginally inch up ballooning import bill for the local oil companies," a petroleum analyst with a foreign brokerage said.

"Though import bill will swell, subsidy pressure will ease as the companies have raised petroleum product prices in the domestic market," Mr Dhimant Shah, analyst with ASK Raymond James, said.

Stocks of state-owned oil companies such as Indian Oil Corporation has shed 22.71 per cent from April till date, BPCL has shed 26.60 per cent, HPCL has lost 31.15 per cent and IBP has come down by 8.69 per cent. "We expect some good buying in these stocks as valuations of Indian oil and petrochemicals stocks are cheaper compared to Asian peers," the analyst with foreign brokerage said.

According to energy analysts, the oil import bill for local firms will swell as the rupee has weakened against the dollar and global crude has shot over $44 a barrel. The subsidy pressure could intensify as the

Government had cut its subsidy exposure in kerosene and liquefied petroleum gas (LPG) last year but allowed the firms to hike prices to buttress the effect to some extent. The Government subsidises LPG by Rs 22.58 per cylinder and kerosene by 81 p per litre and compels the state oil companies to pay for the remaining subsidy, which is directly linked to the global petroleum product prices.

The subsidy bill for 2003-04 was Rs 8,116 crore and this was brought down to Rs 6,573 crore in the revised estimates and slashed to Rs 3,560 crore for 2004-05.

Crude oil and petroleum product import bill grew to Rs 93,159 crore in 2003-04 from Rs 85,042 crore a year ago.

India exported 14 million tonnes of petroleum products for Rs 16,101 crore in 2003-04 and the net oil import bill (import minus exports) was Rs 77,058 crore in 2003-04 from Rs 74,174 crore a year ago.

It was reported that the Government has indicated that domestic fuel prices would be calibrated by taking the mean of average landed price of last three months (which would reflect the current trend) and the landed price in last one year (which will moderate the hike).

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