RIL, ONGC Shares Rise As Government Lowers Windfall Tax On Gasoline Exports

Following the government's reduction of the windfall tax on domestic crude oil production by 27% to Rs 17,000/tonne recently, shares of Reliance Industries, ONGC, Oil India, Chennai Petroleum Corporation, and other oil refining companies rose up to 11%. RIL's share price increased by 4.3% to Rs 2545.05 per unit, while ONGC increased by 5% to Rs 136.40 per unit, Indian Oil Corporation increased by 1.6% to Rs 73.15 per unit, and Chennai Petroleum Corporation increased by 11.4% to Rs 296.40 per unit. Although windfall taxes have not yet been eliminated, Morgan Stanley stated in its study that the government's action has made the future's course more clear. “ RIL, ONGC and OIL are key beneficiaries,” it said. 

Other equities were BPCL, which increased by 5% to Rs 320.30 per share, GAIL, which increased by 5% to Rs 147.30 per share, and Mangalore Refinery & Petrochemicals, which increased by 5% to Rs 76.30 per share. The S&P BSE Oil & Gas index increased 2.6% to 18,704 points. According to Morgan Stanley, as the government's intentions become clear, the overhang for Reliance Industries, Oil India, and ONGC will decrease, and equities prices should begin pricing in strong sustainable energy margins.

The company continued, "We think RIL should be priced at US$13–15/bbl sustainable refinery margins whereas ONGC is priced at US$75–80/bbl oil and US$6/mmbtu commodity deck. In addition, Morgan Stanley highlighted that despite the present oil price volatility and the drop in global fuel margins from their peak levels, RIL and ONGC should suggest a 25–40% upside to equity markets. According to Morgan Stanley, the sector's windfall taxes should be reversed sooner than anticipated, which should push stock multiples progressively higher.

The Centre has reduced export taxes on diesel and aviation turbine fuel by Rs 2 per litre from Rs 13 and Rs 6 per litre, respectively, and removed the Rs 6 per litre tariff it had imposed on the export of gasoline beginning at the beginning of the month. India levied the windfall tax on oil producers and refiners on July 1 in response to their increased product exports in an effort to benefit from greater international margins.