Buzz of government package fuels oil marketing scrips

Shares of three state-run oil marketing companies advanced between 4.35% and 5.59% at 11:10 IST on BSE on reports the Union government is planning a comprehensive package for oil firms to deal with the impact of soaring global crude oil prices.

Bharat Petroleum Corporation (up 5.59% to Rs 365.50), Hindustan Petroleum Corporation (up 4.95% to Rs 245.95), and Indian Oil Corporation (up 4.35% to Rs 424), advanced.

Meanwhile the BSE Sensex was up 56.08 points or 0.33% at 16,963.26

Bharat Petroleum Corporation clocked volumes of 1.89 lakh shares, Hindustan Petroleum Corporation notched volumes of 3.32 lakh shares whereas 2.35 lakh shares changed hands on Indian Oil Corporation counter on BSE

The likely measures include a mix of some duty cuts, additional issue of bonds to the companies as well as a moderate increase in the prices of petrol and diesel.

The soaring global crude prices has dealt a big blow on the profitability of the domestic oil marketing companies (OMCs), as they sell petroleum products below the cost price. The government has not allowed oil firms to raise retail fuel prices despite a surge in crude oil prices in the past few weeks. As per reports, under-recoveries of state-owned oil majors Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation in 2008- 2009 are projected at over Rs 200000 crore on the sale of petrol, diesel, cooking gas and kerosene at prices below the import cost.

US crude oil was trading higher by 0.31% at $131.22 a barrel today, 23 May 2008 after striking record high of $135.09 a barrel yesterday, 22 May 2008.

Meanwhile, Oil Minister Murli Deora today, 23 May 2008, said the issue of oil price revision was not on the agenda for today's cabinet meeting. He, however, said it was necessary to take immediate steps to save oil companies and has called a meeting of heads of the state-owned oil companies tomorrow, 24 May 2008 to discuss the price issue. Earlier today, Petroleum Secretary M.S. Srinivasan said an increase in domestic fuel prices was inevitable and the government would work out the size of the rise by today evening.

Prime Minister Manmohan Singh had on Thursday, 22 May 2008, denied reports that the government planned to raise retail fuel prices in the wake of a surge in global crude oil prices. However he said that state run oil companies will not be allowed to indefinitely suffer the consequences of an administered price regime that does not allow them to raise retail prices even as global crude touches new highs.