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Shares of Reliance, ONGC after hike in fuel export duty and windfall tax



Indian shares fall as Reliance, ONGC crash on fuel export duty

Shares of Reliance Industries and ONGC fell on Friday after the government imposed export tax on petrol, diesel and unexpected tax on domestic crude oil to boost internal supplies.

Energy stocks fell as India imposed unexpected taxes on oil companies that had benefited from rising global crude oil prices and announced export taxes on gasoline, diesel and jet fuel.

The Nifty Energy index fell over 4 per cent in its sharpest fall since mid-May, the only sub-index in the red, on Friday.

India’s most valuable company, oil-to-retail giant Reliance Industries Ltd (RIL), lost $19.35 billion in market value as its stock fell as much as 8.7 per cent since November 2, 2020, Reuters reported. It has the biggest intraday slide.

Shares of RIL closed 7 per cent lower at Rs 2,408.95 per share on the BSE index, taking the market capitalization down by Rs 1.25 lakh crore to around Rs 16.3 lakh crore.

State-owned oil producer ONGC reported a drop of 13.4 per cent – its biggest drop since the pandemic – on March 23, 2020. Oil India slipped over 15 per cent, while Mangalore Refinery and Petrochemicals slipped 10 per cent. Chennai Petroleum Corporation fell over 5 per cent and Hindustan Oil Exploration Company stock fell over 3 per cent.

According to the notification of the Ministry of Finance, the government imposed a tax of Rs 6 per liter on the export of petrol and ATF and Rs 13 per liter on the export of diesel. Additionally, it imposed an additional tax of Rs 23,250 per tonne on locally produced crude oil.

The levy on crude, which follows the record earnings of state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) and private sector Cairn Oil & Gas of Vedanta Ltd, alone paid the government Rs 67,425 annually on 29. crore will be received. Million tonnes of crude oil is produced domestically.

Following Russia’s invasion of Ukraine, oil refiners, notably Reliance Industries and Rosneft-backed Naira Energy, minted by shipping fuel to poorer regions such as Europe and the US.

The export ban is aimed at restoring domestic gasoline supplies at gas stations, some of which were exhausted in states such as Gujarat, Madhya Pradesh and Rajasthan as private refiners preferred to sell fuel abroad rather than sell the fuel locally.

“Reliance is witnessing a sharp decline after the government imposed tax on windfall gains made by domestic refineries. Earlier, Reliance was firing on all cylinders but now there is a pause in its refinery business as the commodity cycle also reversed. However, other verticals have strong growth potential,” Santosh Meena, head of research at Swastika Investmart, told Reuters.

India isn’t the first country to impose an unexpected tax, a 25 percent tax on “extraordinary” revenue from North Sea oil and gas production recently imposed by the UK to raise $6.3 billion for its support program.

Vinod Nair, Head of Research, Geojit Financial Services, said, “Weak cues from the domestic market led to a weak opening on the back of rupee depreciation and sell-off at oil refineries as the government imposed additional export duty on petrol and diesel.” ,

Separately, gold-related stocks fell immediately after news that the government raised the import tax on the precious metal to 15 per cent from the current around 10 per cent to ease pressure on the rupee, which pushed several key-psychological levels. is broken, including the rate of 79 per dollar.

While shares of jewelery makers, Titan Company and Tribhuvandas Bhimji Zaveri, slipped 6 per cent and 4.1 per cent respectively, earlier in the session, they closed the day in the green.

The rupee on Friday hit another all-time low of 79.11 against the dollar, marking a series of all-time weak levels in the past few weeks.

Asian stocks started the new quarter on a largely weak note, with Indian equity benchmarks opening in the red.