BPCL and HPCL in the red

BPCL and HPCL figure out amongst the top five losers on the BSE. BPCL is currently down almost 3% at Rs.436 while HPCL is down over 2% at Rs.285.

Both Govt owned Oil Marketing companies (OMCs) are down on news that the Finance Ministry wants these companies to absorb a much higher share of under recoveries, as much as Rs.5000 crore compared to Rs.900 crore in FY13. The Finance Ministry feels that with consistent fuel price hikes, OMCs today have much better profits and healthier gross refining margins and thus can afford to pay more.

There is no question of upstream oil companies like ONGC and Oil India contributing more  and both have recently been squeezed tight to buy the 10% stake in IOC for Rs.53,400 crore; this is over and above the interim dividend which they have been forced to pay. The Govt, in FY14 is expected to contribute Rs.71,000 crore, which also includes the Rs.35,000 crore rollover.

This is yet to become official and these OMCs are hoping that the Petroleum Minister intervenes in this diktat of the Finance Ministry and bring down their absorption to around Rs.3500 to 3700 crore.