Refiner Stocks Decline Up to 6% Following Government Levy on Diesel and ATF Exports

Financial Report - Domestic Fuel Price Adjustments

Government Announces Additional Duty on Fuel Exports

On March 27, the government levied an additional duty on the export of diesel and aviation turbine fuel (ATF), resulting in a decline in shares of refiner stocks. The additional duty imposed is Rs 21.5 on the export of diesel and Rs 29.5 on ATF.

Impact on Refiner Stocks

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The shares of MRPL and Chennai Petro reacted negatively to the announcement, with MRPL trading 3.5% lower and Chennai Petroleum Corporation trading 6% lower at Rs 944.2 apiece. Additionally, Reliance Industries shares fell 3.5% to Rs 1,364.7, while Manali Petro stock was trading 4% lower at Rs 42.06.

Excise Duty Cuts to Shield Consumers

In a separate development, the government has slashed excise duty on petrol to Rs 3 a litre and exempted diesel from the duty to shield consumers from the impact of rising global crude prices. The global crude prices have risen by almost 50% since the United States and Israel launched military strikes against Iran on February 28.

Effect of Duty Cuts on Oil Companies

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The government has taken a huge hit on its taxation revenues to ensure losses of oil companies are reduced. Oil Minister Hardeep Singh Puri stated that the duty cuts are aimed at reducing the losses of oil companies, which are approximately 24 Rs/litre for petrol and 30 Rs/litre for diesel. The duty cuts are effective immediately and are expected to provide relief to oil companies.

Rating Agency Predictions

Rating agency ICRA had predicted that if the average crude oil price goes up to $100-105/bbl, fuel retailers would incur a loss of Rs 11 per litre on petrol and Rs 14 per litre on diesel. The agency had also suggested that the government may reduce excise duty rates on petrol and diesel to keep retail sale prices stable at existing levels.